If you pay attention to financial news, especially from the retail and restaurant segments, you hear a lot about how rising energy costs and interest rates are cutting into consumer discretionary spending. Many restaurant companies blame those factors for declines in the popular same-store sales metric, also known as "comps" (usually defined as revenue growth for stores open for more than one year). But I'm having a hard time believing such claims.
Steak n Shake
Addressing the results, Peter Dunn, president and CEO, said, "We continue to see the impact that high gas prices and rising interest rates are having on some of our customers' spending habits." Last quarter, he said, "The same-store sales environment remains difficult, given the impact of rising energy prices and other influences on discretionary consumer spending." Alas, Steak n Shake has joined the comps chorus.
But the choir is split. Several chains, including Jack in the Box
Fair enough, says one side of the comp chorus. People are shifting their spending habits to less expensive places to eat. Not quite, say the opposition. While some upscale eateries like Cheesecake Factory
Steak n Shake increased comps for 10 quarters in a row, but it's now hit a snag. This last quarter marked its fourth consecutive decline. Whether the problems stem from gas-price-driven consumer spending shifts or not, Steak n Shake needs to get a handle on this before it worsens. Introduction of new menu items such as Bits n Pieces (candy mixed into its shakes) will help. A series of promotions might as well, as they have for IHOP
I'm hopeful that the company can turn things around, but as an investor, I'd wait for indications of such a turnaround before buying in.
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Fool contributor Jim Mueller likes to visit Steak n Shake and sprinkle their banana pepper-flavored vinegar over his thin-cut fries. Out of all the companies mentioned, he owns shares in only Cheesecake Factory. The Fool likes you to know these things.