Ms. Zackfia: I try to follow the cream of the crop, so I follow Starbucks (SBUX), The Cheesecake Factory (CAKE), P.F. Chang's (PFCB), Sonic (SONC) and Panera (PNRA).
TWST: If you look back at 2006, how did they perform relative to expectations
from a business point of view?
Ms. Zackfia: Starbucks and Sonic both had very good years. Clearly, casual
dinning had a more challenging 2006, so that impacted Cheesecake Factory and
P.F. Chang's, and Panera's second half of the year was certainly not up to their
initial expectations.
TWST: What has gone on with casual dining that has made it difficult?
Ms. Zackfia: We also follow hardline and softline retail companies. So we
certainly noticed over the past six or seven years that restaurant trends,
particularly casual dining trends, tend to lead overall consumer spending by a
quarter or so. When we saw casual dining trends start to soften in the first
half of 2006, we began to worry about overall consumer spending patterns,
especially when management teams talked about how the trends softening was
primarily a function of lower average tickets falling out of the mix.
Subsequently, retail sales began to slow by the back-to-school season.
The good news is that trends seem to have stabilized in casual dining since late
last summer, but they are not yet improving. But that stability is at least
offering better visibility on overall sales and earnings.
Tickers included in this excerpt: CAKE, PFCB, PNRA, SBUX, SONC
For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.