E Why Are Restaurants Talking About Weather?

Power being off in the area but on in your restaurant, presence of hungry police or disaster recovery personnel, or even the presidential security detail in the general area are traditional business spikers. Road construction, bridge collapses (think: Minneapolis, I-35, Atlanta I-85) and terrorism negatively impact business. Yet, there is no organized way to track these occurrences.

The obsessive interest in same-store sales, the comp pressure, is one of the reasons companies use weather as an explanative factor. It’s not productive, though, as it diverts internal company and confuses investors. Sometimes, a same store sales comp is thought to be a pass/fail bumper sticker. For example, two-quarters ago, a “short side” analyst said that Starbuck’s stock would be “toast” if they came in under +5%. Really? Does thirty years of brand development and reputation come down to just one number? It really shouldn’t and analysts who pin it all on same-store sales and neglect other operating fundamentals are doing a disservice to their firms and investors.

More meaningful metrics please: As I’ve advocated for many years, comps need to be viewed also on a two-year five year and even longer basis. For example, since the last restaurant business trough was in 2009, a 2016 to 2009 cumulative, average or compound average growth factor seems more useful. Ron Shaich of Panera (PNRA) talked to the one quarter focus of many investors recently, in March when the big JAB buyout of Panera was announced. The one year comps obsession reinforces this bias. Panera will soon come off the Nasdaq board, meaning that future year equity investors won’t be able to invest. Ron indicated such a short term quarter to quarter focus was no way to build and sustain a business. Fortunately, Ron and his Board had the resources to vote with their feet.

Hopefully, we can kill the weather discussion, short of hurricane, tornado or extreme global events. There are always plenty of other meaningful things to talk about.

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Disclosure: The author has no positions in any stocks mentioned.

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