1 00:00:02,520 --> 00:00:08,840 Speaker 1: Bloomberg Audio Studios, podcasts, radio news, The. 2 00:00:08,880 --> 00:00:13,160 Speaker 2: Stock Movers podcast, your roundup of companies making moves in 3 00:00:13,200 --> 00:00:16,520 Speaker 2: the stock market. Harnessing the power of Bloomberg Data. 4 00:00:18,079 --> 00:00:20,400 Speaker 3: Let's take another look at consumer products, but look at 5 00:00:20,400 --> 00:00:24,280 Speaker 3: it at the lens of restaurants and restaurant valuations, kind 6 00:00:24,320 --> 00:00:27,120 Speaker 3: of the haves and have nots. Michael Hanlin, Bloomberg Intelligence 7 00:00:27,120 --> 00:00:29,800 Speaker 3: Senior restaurant and food service analyst, joins us now fresh 8 00:00:29,880 --> 00:00:33,000 Speaker 3: out of a recent report. So I asked Diana this 9 00:00:33,040 --> 00:00:35,519 Speaker 3: this like, who's the winner in the consumer staples? And 10 00:00:35,600 --> 00:00:37,520 Speaker 3: she was like ooh, And it took her a while 11 00:00:37,520 --> 00:00:38,960 Speaker 3: to get there because it's really rough. 12 00:00:39,200 --> 00:00:41,159 Speaker 4: Same question to you. Who are the winners in the 13 00:00:41,159 --> 00:00:41,800 Speaker 4: restaurant biz. 14 00:00:42,120 --> 00:00:44,080 Speaker 5: Two of the names that we really like this year 15 00:00:44,120 --> 00:00:45,640 Speaker 5: at Cracker Barrel and Shake Shack. 16 00:00:45,800 --> 00:00:46,960 Speaker 1: They Crackerbail. 17 00:00:47,000 --> 00:00:48,880 Speaker 4: I still got to go many the goals. 18 00:00:49,240 --> 00:00:52,240 Speaker 1: They hired new CEOs last year. 19 00:00:52,880 --> 00:00:56,600 Speaker 5: They're really focusing on improving the operations first and then 20 00:00:56,640 --> 00:01:00,880 Speaker 5: the marketing there, and so we're really excited about some 21 00:01:00,960 --> 00:01:03,840 Speaker 5: of the changes and some of the early results. You know, 22 00:01:03,960 --> 00:01:07,080 Speaker 5: both of them we expect to outperform pretty significantly on 23 00:01:07,160 --> 00:01:08,520 Speaker 5: the top line this year. 24 00:01:09,160 --> 00:01:10,199 Speaker 1: Well, the cracker barrel. 25 00:01:10,360 --> 00:01:12,080 Speaker 5: I mean, I know my way around a cracker bar 26 00:01:12,160 --> 00:01:14,520 Speaker 5: I know where every little nud nick is in every store. 27 00:01:14,760 --> 00:01:17,000 Speaker 1: Every store is the same. And then of course the 28 00:01:17,040 --> 00:01:19,000 Speaker 1: same order the Country Boy breakfast. 29 00:01:19,120 --> 00:01:20,560 Speaker 4: But what'sn't that am It's not like. 30 00:01:20,640 --> 00:01:24,360 Speaker 5: The country Boy breakfast with the country ham, Okay, and 31 00:01:24,480 --> 00:01:25,959 Speaker 5: you get biscuits and gravy. 32 00:01:26,840 --> 00:01:27,360 Speaker 1: It's a whole thing. 33 00:01:27,400 --> 00:01:27,880 Speaker 4: It's a whole thing. 34 00:01:27,920 --> 00:01:31,279 Speaker 1: It's a whole thing. Unbuttoned yourself and sit right down. Yeah, 35 00:01:31,319 --> 00:01:33,040 Speaker 1: what are they changing here? What is it? Because that's 36 00:01:33,120 --> 00:01:35,039 Speaker 1: kind of what they are. It seems like their DNA 37 00:01:35,240 --> 00:01:36,880 Speaker 1: is kind of that type of stuff. 38 00:01:37,200 --> 00:01:37,400 Speaker 2: Yeah. 39 00:01:37,480 --> 00:01:39,520 Speaker 5: So so one of the first things they did was 40 00:01:40,240 --> 00:01:42,720 Speaker 5: focus their menu, right. There was a lot of items 41 00:01:42,760 --> 00:01:45,800 Speaker 5: on there that were not selling very good and also 42 00:01:45,840 --> 00:01:49,280 Speaker 5: bogging down the kitchen. That has made the experience better 43 00:01:49,360 --> 00:01:50,600 Speaker 5: for the employees. 44 00:01:51,280 --> 00:01:53,240 Speaker 1: Employee turnover has plummeted. 45 00:01:53,360 --> 00:01:56,120 Speaker 5: It was down, you know, high teens year over year 46 00:01:56,160 --> 00:01:58,640 Speaker 5: in the last quarter. So that saves them a lot 47 00:01:58,640 --> 00:02:01,440 Speaker 5: of money on training and things of that nature provid 48 00:02:01,560 --> 00:02:03,760 Speaker 5: you know, as the longer your employees stay, obviously, the 49 00:02:03,760 --> 00:02:06,880 Speaker 5: better experience your customers get and then people come back. 50 00:02:07,760 --> 00:02:11,040 Speaker 5: They're also touching up the stores. They're going to remodel 51 00:02:11,080 --> 00:02:14,320 Speaker 5: the stores. Lighting and paint are some are some of 52 00:02:14,360 --> 00:02:17,160 Speaker 5: the things that they're going to do across all the stores. 53 00:02:17,200 --> 00:02:18,720 Speaker 1: Some of the stores need more work. They'll do the 54 00:02:18,720 --> 00:02:19,560 Speaker 1: floors as well. 55 00:02:20,360 --> 00:02:23,360 Speaker 5: That's something they're starting to do. And then they're ramping 56 00:02:23,440 --> 00:02:25,919 Speaker 5: up the marketing. So now that the operations are running well, 57 00:02:26,360 --> 00:02:29,959 Speaker 5: they're doing more social media marketing TikTok. 58 00:02:31,080 --> 00:02:31,280 Speaker 1: There. 59 00:02:31,760 --> 00:02:35,120 Speaker 5: They they just had their first NASCAR race and the 60 00:02:35,160 --> 00:02:39,400 Speaker 5: Cracker Barrow four hundred down in Tennessee, right Crystal, And 61 00:02:39,760 --> 00:02:42,360 Speaker 5: they're advertising on live sports as well as Bravo. 62 00:02:42,400 --> 00:02:43,799 Speaker 1: There's huge overlap. 63 00:02:43,360 --> 00:02:48,160 Speaker 5: Between casual dining fans and Bravo watchers and so yes, 64 00:02:48,480 --> 00:02:49,520 Speaker 5: I did not see that coming. 65 00:02:50,120 --> 00:02:52,120 Speaker 3: So on the other hand, what are some of the 66 00:02:52,160 --> 00:02:54,000 Speaker 3: companies that aren't doing so well? 67 00:02:54,480 --> 00:02:57,440 Speaker 5: Oh yeah, so, you know some of the legacy casual 68 00:02:57,480 --> 00:03:00,960 Speaker 5: dining brands. Casual dining in general is having somewhat of 69 00:03:00,960 --> 00:03:06,600 Speaker 5: a renaissance. This year's casual Chili's is the one they've 70 00:03:07,000 --> 00:03:14,799 Speaker 5: Chilies is rocking it absolutely, and Applebee's is not. So 71 00:03:14,840 --> 00:03:18,960 Speaker 5: you got you got your preferences confused right now? Backwards, 72 00:03:19,000 --> 00:03:22,520 Speaker 5: I'd say, so, yeah, dining brands which owns Applebee's and Ihop. 73 00:03:22,560 --> 00:03:26,720 Speaker 5: They're having a real, real hard time resonating with younger 74 00:03:26,760 --> 00:03:30,480 Speaker 5: consumers and haven't been able to bring those consumers into 75 00:03:30,520 --> 00:03:34,280 Speaker 5: the brand. They also have a large number of low 76 00:03:34,320 --> 00:03:37,400 Speaker 5: income consumers that visit those brands, and so that's really 77 00:03:37,880 --> 00:03:42,280 Speaker 5: hurting their hurting their results. And then blooming brands out 78 00:03:42,320 --> 00:03:46,040 Speaker 5: back steakhouses their biggest change. They've they've same type of situation. 79 00:03:46,800 --> 00:03:49,160 Speaker 5: They've struggled to bring in younger consumers into the brands, 80 00:03:49,200 --> 00:03:50,320 Speaker 5: and their pricing. 81 00:03:49,960 --> 00:03:51,600 Speaker 1: Got way ahead of itself. 82 00:03:51,720 --> 00:03:53,840 Speaker 5: So if you compare them to Texas Roadhouse, it's a 83 00:03:53,880 --> 00:03:58,480 Speaker 5: way more expensive experience and yet maybe not a better product, 84 00:03:58,640 --> 00:04:01,760 Speaker 5: not a better experience for the consumer, definitely not better service. 85 00:04:02,600 --> 00:04:05,800 Speaker 5: Your coverage is a great reflection of the consumer. 86 00:04:06,160 --> 00:04:07,920 Speaker 1: What are your takeaways? How is the consumer out there? 87 00:04:07,920 --> 00:04:08,920 Speaker 1: What are the restaurants telling you? 88 00:04:09,360 --> 00:04:11,360 Speaker 5: They're doing all right? They're doing all right. Last year 89 00:04:11,400 --> 00:04:14,280 Speaker 5: was a restaurant session. This year results are better and 90 00:04:14,360 --> 00:04:16,280 Speaker 5: we expect them to get better in the second half. 91 00:04:16,600 --> 00:04:19,560 Speaker 5: You know, first quarter there was some consternation, but it 92 00:04:19,640 --> 00:04:21,960 Speaker 5: was a lot of bad weather. There's a bad flu season. 93 00:04:22,839 --> 00:04:25,400 Speaker 5: There was some pullback by low and middle income consumers 94 00:04:25,440 --> 00:04:27,599 Speaker 5: in March, but they seem to have rebound. Results have 95 00:04:27,640 --> 00:04:32,120 Speaker 5: been pretty strong thus far, and the economic indicators that 96 00:04:32,160 --> 00:04:34,320 Speaker 5: we watch are starting to get a little bit better. 97 00:04:34,480 --> 00:04:38,640 Speaker 4: So unvalued appropriately for the conditions right now. 98 00:04:39,279 --> 00:04:42,520 Speaker 5: Well, you know me personally, I don't look at historical 99 00:04:42,640 --> 00:04:45,640 Speaker 5: valuations because the market cycles change so much. 100 00:04:45,720 --> 00:04:47,240 Speaker 1: I'm looking at it on a. 101 00:04:47,200 --> 00:04:50,760 Speaker 5: Relative basis, right, and so to what relative to the 102 00:04:50,800 --> 00:04:53,279 Speaker 5: peer group? Okay, yeah, and so I seem and so 103 00:04:53,360 --> 00:04:56,320 Speaker 5: it depends on the name, right, It definitely depends on 104 00:04:56,360 --> 00:04:59,440 Speaker 5: the name. But you know, I think restaurants are set 105 00:04:59,480 --> 00:05:01,240 Speaker 5: up for a nice strong second half. We also have 106 00:05:01,560 --> 00:05:03,520 Speaker 5: are going to have that tailwind of tax cuts, and 107 00:05:03,560 --> 00:05:06,479 Speaker 5: so I think just getting that, having that be the 108 00:05:06,600 --> 00:05:10,520 Speaker 5: narrative versus tariffs and war and whatever else, I think 109 00:05:10,520 --> 00:05:13,000 Speaker 5: it's going to help shift consumer sentiment and spending. 110 00:05:13,760 --> 00:05:16,559 Speaker 1: Just the quick service restaurants, which otherwise is fast food. 111 00:05:16,680 --> 00:05:17,320 Speaker 1: How are they doing? 112 00:05:17,839 --> 00:05:22,000 Speaker 5: Fast food is struggling? Number one, they're lapping harder comparisons 113 00:05:22,000 --> 00:05:25,040 Speaker 5: from last year. Number two, they have more exposure to 114 00:05:25,080 --> 00:05:27,279 Speaker 5: low income consumers, which continue to be hurt by the 115 00:05:27,279 --> 00:05:29,120 Speaker 5: inflation that we've seen, right. 116 00:05:29,880 --> 00:05:31,520 Speaker 1: And number three, they've overbuilt. 117 00:05:31,640 --> 00:05:37,640 Speaker 5: So since since the pandemic, full service chains, casual dying 118 00:05:37,720 --> 00:05:40,080 Speaker 5: chains kind of pulled back on their development. 119 00:05:40,120 --> 00:05:41,960 Speaker 1: They closed stores. Fast food has. 120 00:05:41,880 --> 00:05:44,839 Speaker 5: Just been full steam ahead of opening stores, so supplying 121 00:05:44,839 --> 00:05:45,880 Speaker 5: demand has gotten out of whack. 122 00:05:46,040 --> 00:05:48,599 Speaker 4: All right, Michael, thanks a lot. Really appreciate really good stuff. 123 00:05:49,600 --> 00:05:53,720 Speaker 2: The Stock Movers podcast from Bloomberg Radio. 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