Casual Dining Woes: People Too Cheap To Eat Out (BWLD, PNRA, TXRH, RRGB, CAKE, PFCB, EAT, DRI, CMG)

The economy is getting better.  People are spending more money.  Retail saw a giant March and is expected to have another great same-store sales figure on an individual basis for April.  Right?  Somehow, that is not turning out to be the case. It seems that some growth-oriented casual dining chains are running into trouble.  Buffalo Wild Wings Inc. (NASDAQ: BWLD) and Panera Bread Co. (NASDAQ: PNRA) are the two big problems today and analysts are going to have to unilaterally trim growth estimates and perhaps lower price targets.  We are seeing key moves in Texas Roadhouse Inc. (NASDAQ: TXRH), Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB), The Cheesecake Factory Incorporated (NASDAQ: CAKE), PF Chang’s China Bistro Inc. (NASDAQ: PFCB), Darden Restaurants, Inc. (NYSE: DRI), Brinker International Inc. (NYSE: EAT), and even in Chipotle Mexican Grill, Inc. (NYSE: CMG).

Buffalo Wild Wings Inc. (NASDAQ: BWLD) is the biggest problem child of the casual dining chain stocks today.  The company tanked last night when it said that its Q1 profit rose 24% to $0.58 EPS on revenue of $152.3 million; Thomson Reuters had estimates of $0.57 EPS and revenue of $154.4 million. The problem is same-store sales that puts its forecast of 20% earnings growth at risk.  The quarter’s same-store sales rose only 0.1% and only 0.7% at franchised restaurants.  The problem is that both classes saw drops of roughly 3.7% at company-owned stores and fell 2.4% at franchise stores so far in April.  If you look at the prior growth of 20%, the implied earnings comes to about $2.04 EPS for the fiscal-year.  Thomson Reuters is looking for $2.06 EPS.  Its shares are down 18.4% at $41.61.

Panera Bread Co. (NASDAQ: PNRA) is the other problem child, just to a lesser extent.
Earnings were $0.82 EPS, matching estimates. Revenues gained by 14% to $364.2 million and same-store sales rose 10% for company sites and 9.2% at franchise stores.  While Panera reiterated guidance, the slowing of growth was too much for a growth stock to handle.  The company sees next quarter of $0.81 to $0.83 EPS on 8.5% to 9.5% in same-store sales; and it reiterated a 2010 expected range of $3.40 to $3.44 EPS with a 6.5% to 7.5% gain in same-store sales.  The quarterly estimate from Thomson Reuters is $0.84 EPS next quarter and the annual estimate is $3.52 EPS.  Panera shares are down 6% at $81.00.

Texas Roadhouse Inc. (NASDAQ: TXRH) and Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB) are different in that they are ‘bar-b-q’ and burger chains, but both are growth chains and are marketing to the same customers.  Texas Roadhouse is down 7.8% at $14.32 and Red Robin is down 6% at $24.13.

The Cheesecake Factory Incorporated (NASDAQ: CAKE) and PF Chang’s China Bistro Inc. (NASDAQ: PFCB) may be a tad higher up the casual dining food chain with slightly higher average ticket items, but they are getting hit today as well.  Cheesecake is down 6% at $27.77 and PF Chang’s is down 5.8% at $43.73.

Two other casual dining behemoths are down with the sector, although as they are mature they are down less than the higher-beta growth chains: Darden Restaurants, Inc. (NYSE: DRI) and Brinker International Inc. (NYSE: EAT).

Darden Restaurants Inc. (NYSE: DRI)  has Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, and Seasons 52.  Because it has more than 1,700 locations, its stock is down “only” 2.1% at $46.01.  Brinker International Inc. (NYSE: EAT) is down worse than Darden, but is off “only” 3.8% at $18.88.  It has almost 1,700 chains among its Chili’s Grill & Bar, On The Border Mexican Grill & Cantina, and Maggiano’s Little Italy chains.

Chipotle Mexican Grill, Inc. (NYSE: CMG) is down as collateral damage and is meant for reference only.  It is after a lower per-person ticket and is the old McMex play.  This stock also rose almost $20.00 after earnings and guidance were better than expected just last week.  Its stock is down 2.3% mid-day at $135.83.

There are many issues that explain this.  Some will say that it is a more competitive environment.  Some already have.  But at the end of the day, this is a huge disappointment when you consider that we are supposed to be in the midst of a recovery and when people are finally getting hired back to actual paying jobs.  This is a notion that Americans are still hanging on to value and thriftiness, and for longer than what many analysts and economists (and company executives) have been thinking.

JON C. OGG