Lane Cardwell

Pessimism Replaced By Realism

I attended the Cowen and Company 7th Annual Consumer Conference in New York this week. It is widely attended by both restaurant and retail CEO's and CFO's, as well as those who invest in, or report on the performance of these two sectors. 21 restaurant companies made presentations over a two day period on their results through the third quarter of 2008, and their view of 2009. Due to the early January timing of the conference it is too early for companies to comment on their fourth quarter results. Probably just as well.

Let me start by saying that it wasn't all doom and gloom. A handful of companies are enjoying good sales performance. Chipotle continues to impress. As does Buffalo Wild Wings. A few others are enjoying good results considering the economic climate.

One of the things that many people aren't aware of is that you don't have to attend these investor conferences in person in order receive the information that is presented. Most of the companies will do a webcast that is accessed on their company website under a section usually titled "Investors". If you aren't able to hear it live it is usually available for days or weeks following the conference. Many also will include a copy of the slides that they are presenting at the conference. The links to Chipotle and Buffalo Wild Wings above will take you to their slide presentation from the conference.

As usual there was an inverse relationship between the check average of the restaurant company and their comparable store sales results. The higher the check, the lower the sales performance. Not across the board, but it seemed to hold true for most. Casual dining and above still seem to be in the consumer's penalty box.

Most companies are not expecting 2009 to be much different from 2008, at least for the first half. The only saving grace this year will be that it looks like runaway commodity inflation is behind us, and costs in 2009 will be more moderate and manageable.

Many companies described their plans for price increases in 2009 to be "little or none". One exception was Chipotle, who was expecting to increase prices 6% this year ("Party like it's 2008!"). Many wish that they could take back the last increase that they took during 2008, and have the customers that they chased away instead.

The majority of  the descriptions of marketing activity for the upcoming quarters revolved around various deals and value pricing. The focus is on keeping people coming to the restaurant at any price. Or almost at any price. Those who have resisted matching or participating in the types of deals that get customers out of their homes and into their cars are wondering out loud what happened to their sales. Pride has a way of getting expensive during times like these. Mensa, the society of geniuses, has a sister organization for these individuals. It's called Densa.

One of New York's most prominent multi-concept operators, Steve Hanson of B.R. Guest, spoke at the conference. He has a collection of 13 moderate to higher-end concepts, with 17 locations, in New York, Chicago and Las Vegas. Steve was very forthright in his thoughts about 2009. "We are going to look back at 2008 and think that it was a good year compared to 2009." 
                            

Two days later Steve announced the closing of two locations and the conversion of two more. Steve said that sales in his concepts died toward the end of December, and he was not sure it was coming back any time soon.

The realism that has set in among many CEOs is that we perhaps are in a marathon which must be finished, rather than a race which must be won. Without knowing the duration of what we are into, it is important to plan for the worst, and hope for the best. However, as Bert Vivian, co-CEO of P.F. Chang's said, "Hope is not a strategy."

Posted by Lane Cardwell on January 15, 2009 | Comments (4)