Sector Snap: Casual dining falls

Casual dining shares slid Tuesday as a Cowen and Co. analyst said October sales appeared to be declining at most chains and investors digested the lackluster fiscal first-quarter results at Brinker International Inc.

Analyst Paul Westra said in a note to investors that his survey of restaurants in the past three weeks suggest a "geographically broad-based" decline in same-store sales, or sales at locations open at least a year.

Westra said the recent drop is "largely due to significantly reduced consumer confidence driven by the current economic meltdown within the housing/credit/stock markets."

Consumers have been cutting back on eating out in favor of meals at home or cheaper fast food. Anxiety about the overall economy has intensified in the past few weeks as the stock market has fluctuated wildly and retirement funds have begun to show some losses.

Westra also downgraded his ratings on Cheesecake Factory Inc. and Kona Grill Inc. to "Neutral" from "Outperform," saying he does not expect sales to recover in the fourth quarter. Both chains started their fourth quarters this month.

Cheesecake Factory shares fell 68 cents, or 6.5 percent, to $9.80, while Kona shares dropped 24 cents, or 6.5 percent, to $3.43 in afternoon trading.

The analyst said BJ's Restaurants Inc. and Texas Roadhouse Inc. are his two top picks due to their "strong value proposition" and their relatively low prices.

BJ's shares slipped 44 cents, or 4.7 percent, to $8.89, and Texas Roadhouse shares slid 17 cents to $7.55.

Besides Westra's comments, investors may also have been reacting to the latest profit report from Brinker, the owner of the Chili's Grill & Bar chain.

Brinker reported a 37 percent drop in fiscal first-quarter profit because of a decline in traffic and sales. The company said consumers appeared to be eating out less, particularly for dinner during the week.

Brinker shares fell 48 cents, or 4.7 percent, to $9.74.