This post is part of the On the Margin blog.
Wall Street is still favoring the restaurant industry.
Publicly traded restaurants are up more than 7 percent so far this year, according to the NRN Restaurant Index, a rate that bests the 5.5 percent increase for the S&P 500 this year.
Yet, for as strong as that performance is, there remain big winners and big losers among the companies that sell stock on the public markets.
Indeed, among the companies we track, there is a 125 percentage point difference in performance between the strongest performer (Buffalo Wild Wings franchisee Diversified Restaurant Holdings) and the worst (Ignite Restaurant Group). Just fewer than half of the companies we track, in fact, are down so far this year.
And some of the better performances this year have come from some of the bigger restaurant companies.
McDonald’s Corp., Bloomin’ Brands Inc., Darden Restaurants Inc., Domino’s Pizza Inc., Restaurant Brands International Inc., Chipotle Mexican Grill Inc., and Panera Bread Co. have all seen their stocks go up by at least 6 percent this year.
Meanwhile, the poorest performing companies on Wall Street have tended to be smaller companies like Kona Grill Inc., Luby’s, Famous Dave’s and Fiesta Restaurant Group.
Perhaps not surprisingly, investors were much more willing to put their money into limited-service concepts than they were in anything that requires table service.
On average, limited-service concepts — including quick service, fast casual, pizza and coffee concepts — averaged nearly 3-percent stock price increase in the first quarter.
By comparison, casual and family-dining concepts fell 4.4 percent on average.
Consumers are clearly shifting their spending toward quicker concepts where they can get their food and run, and away from dine-in chains. Industry same-store sales figures have confirmed this, and there are growing concerns among investors that large-scale casual dining concepts are going to have to close locations.
Meanwhile, investors appear to be trading based on mergers and acquisitions. Bravo Brio Restaurant Group, for instance, is up 34 percent this year — the company is exploring strategic alternatives. Investors were thrilled about Bob Evans Farms Inc.’s plans to sell its restaurant division — the company’s stock is up 22 percent.
Restaurant Brands International Inc., which is paying a massive acquisition multiple for Popeyes Louisiana Kitchen, is up 17 percent. Darden Restaurants Inc., which is buying Cheddar’s, is up 15 percent.
At the same time, investors jumped on board Noodles & Company, up 40 percent in the first three months, after a pair of private equity groups backed the chain.
On the other end, investors have hammered poor performance. Ignite Restaurant Group, which was delisted and now might file for bankruptcy, is down more than 60 percent. Kona Grill, which reported a 4.1 percent decline in same-store sales in the fourth quarter, is down nearly 50 percent. DineEquity is down 30 percent after major struggles at Applebee’s.
Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.
Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze