S&P Equity Research Sees Drop in Discretionary Spending Harming Restaurants
26 Abril 2006 - 10:43AM
PR Newswire (US)
Higher Gas Prices Taking Biggest Toll on Family Dining and Midwest
Restaurants NEW YORK, April 26 /PRNewswire/ -- In its latest
semi-annual survey on the restaurant industry, Standard &
Poor's Equity Research Services outlines its neutral outlook on the
industry and explains how higher fuel costs and consumers' economic
concerns are the leading factors negatively impacting family dining
chains and restaurants in the Midwest. These and other findings are
available in the report, Restaurants Industry Survey, published
twice yearly by Standard & Poor's, a leading provider of
independent investment research. According to Standard & Poor's
Equity Research, higher gas prices have caused consumers to curb
their discretionary spending, which has hurt customer traffic
trends and average checks throughout the industry. The segment most
impacted has been the family dining chains such as Cracker Barrel
Old Country Store (NASDAQ:CBRLNASDAQ:3-STARSNASDAQ:$42), Bob Evans
Farms (NASDAQ:BOBENASDAQ:2-STARSNASDAQ: $29) and Ryan's
(NASDAQ:RYANNASDAQ:2-STARSNASDAQ:$13), due to the proximity of
their locations to highways and their reliance on lower and middle
income consumers, who have been disproportionately affected.
Additionally, restaurants with concentrations in the Midwest have
also underperformed. These chains have been negatively impacted by
consumers' economic concerns regarding the manufacturing sector of
the economy, according to S&P. Relative to services,
manufacturing is struggling and a disproportionate number of these
jobs are located in the Midwest. "Longer term, industry
fundamentals look solid. Declining food costs and product
innovation have spurred industry growth, but the impact of gasoline
prices cannot be overstated, particularly for the family dining
chains," says Dennis Milton, Restaurant Analyst with Standard &
Poor's Equity Research Services. "These companies' customers have
the least amount of discretionary dollars and their jobs are the
most economically sensitive." Despite a difficult operating
environment, Standard & Poor's Equity Research Services sees
opportunities for a few restaurant chains and has a "Strong Buy"
(5-STARS out of 5) recommendation on Applebee's International
(NASDAQ:APPBNASDAQ:$24) due to its low relative valuation compared
with casual dining peers, despite S&P's view of its superior
historical returns on equity and strong growth prospects. Standard
& Poor's Equity Research Services also has a "Strong Buy"
(5-STARS) recommendation on Red Robin Gourmet Burgers
(NASDAQ:RRGBNASDAQ:$46) due to its view of a strong near-term
outlook and excellent long-term growth prospects. View a video clip
of Standard & Poor's equity analyst Dennis Milton, discussing
the sector here,
mms://wmd31sea.activate.net/sandp/windows/sptv-survey-25.wmv.
Standard & Poor's Industry Surveys provide a broad and
fundamental overview of each industry's structure, its recent
performance, and an analysis of trends that are expected to
influence it in the future. Each Survey is organized into the
following sections: Current Environment, Industry Profile/Industry
Trends, How the Industry Operates, Key Industry Ratios and
Statistics, How to Analyze a Company, Industry References,
Comparative Company Analysis, and a Glossary of terms used in that
industry. Both text and data are provided, as are references to
additional sources of industry information. Two surveys on each
industry are published each year. Readers can purchase Standard
& Poor's Industry Surveys three ways: Online for immediate
download at http://sandp.ecnext.com/, by telephone at 212-438-4052,
or via e-mail order sent to . Members of the media can request a
copy from the communications contact listed at the end of this
release. The analyst quoted above is a Standard & Poor's equity
analyst. He has no affiliation with any company he covers, nor any
ownership interest in any company he covers. About Standard &
Poor's Equity Research Services As the world's largest producer of
independent equity research, over 1,000 institutions license
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& Poor's team of 100 experienced U.S., European and Asian
equity analysts use a fundamental, bottom-up approach to assess a
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Poor's Equity Research Services has no access to non-public
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analysts is governed by the firm's Research Objectivity Policy, a
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http://www.standardandpoors.com/. About Standard & Poor's
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