A Robert W. Baird & Co. analyst said Monday that guest traffic at restaurants is likely to improve in September, but it may not be enough to help some companies meet third-quarter expectations.
Analyst David Tarantino said in a note to investors that in a recent survey of privately held chain restaurants, same-store sales, or sales at locations open at least a year, were "sluggish" in August with 42 percent of respondents calling sales "below expectations."
Tarantino said he expects "less negative" traffic trends in September, partly due to slightly lower gas prices. He estimates that traffic at casual dining chains could be down 3 percent to 4 percent in September after an estimated drop of 5 percent to 6 percent in the July-to-August period.
But he said some companies will likely need better September traffic trends than that to reach their third-quarter earnings estimates. The analyst named BJ's Restaurants Inc., Cheesecake Factory Inc., P.F. Chang's China Bistro Inc., Steak n Shake Co. and Ruth's Hospitality Group Inc. as companies that may struggle to meet expectations. Tarantino holds a "Neutral" rating on those stocks.
Tarantino said Chipotle Mexican Grill Inc., Buffalo Wild Wings Inc., Panera Bread Co and Texas Roadhouse Inc. are better positioned to either meet or beat third-quarter estimates. Tarantino has an "Outperform" rating on shares of those companies.
Meanwhile, shares of most restaurant companies rose Monday along with the overall market. Stocks jumped as investors bet the economy would likely begin a recovery now that the U.S. government has said it will bail out mortgage lenders Fannie Mae and Freddie Mac.
Chipotle shares rose $1.74 to $71.71 while shares of Panera climbed $1.05 to $53.55 in morning trading.
Shares of P.F. Chang's edged up 6 cents to $26.21 and shares of Ruth's Hospitality rose 8 cents to $4.61.
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