At the 2017 ICR Exchange conference, where public and private brands across restaurants and retail come together to share news with investors, there was an upbeat outlook for the year despite some ongoing difficult conditions.
Same-store sales dipped another 4.3 percent and traffic sank 6.4 percent in December, according to restaurant analysis firm TDn2K. So the “Trump bump” and high consumer confidence have been nice for Wall Street, but they haven’t changed much on Main Street so far.
Restaurants will likely see a lot of the same rough conditions they saw in 2016, namely too many restaurants and not enough traffic. Oversupply notwithstanding, just about every restaurant company has some aggressive expansion goals. It’s like a game of chicken—speed ahead with easy capital and see who flinches. Those brands with a strong management team in the driver’s seat will continue to outperform.
Look for another year of strong performers like Domino’s, Wingstop and Del Taco and Restaurant Brands International (Burger King and Tim Hortons) to eat up more market share.
Those stocks surged ahead in 2016, up 38 percent, 40 percent, 38 percent and 34 percent respectively. Each pushed through the year focusing on different things: technology at Domino’s, food quialty and branding at Wingstop, menu innovation at Del Taco and discount-heavy value at RBI.
So what has investors so eager for the new year? Well, companies still getting traction or just hoping to stop the slide still need to innovate, but they might get some help from Washington. Presidential promises from healthcare to corporate tax changes and the likely addition of CKE’s Andy Puzder as Labor Secretary could take significant pressure off the P&L in the coming months and years.