Lay Off the Cheesecake This Holiday Season

Predicting consumer behavior during the holidays [View in browser]( Proprietary Data Insights Top Surging Restaurant Stocks Week Over Week Rank Name Searches #1 Cracker Barrel +774% #2 Cheesecake Factory +152% #3 BJ’s Restaurants +138% #4 El Pollo Loco +122% #5 Papa John’s +91% #ad [What Financial Professionals Are Researching]( Source: Google Finance What do the two tickers with the biggest week-over-week surges in investor interest, based on data from Trackstar, our proprietary sentiment indicator, have in common? The Juice answers that question in a minute. Spoiler alert: Jennifer Coolidge. Oh, wait! Wrong tab. Cracker Barrel (CBRL) and Cheesecake Factory (CAKE) have something in common with big mall-based department stores. Speaking of department stores… We [wrote about them just yesterday](. Now, we have a quick update that ties into today’s holiday food theme (we’ll connect those dots in a bit). Macy’s (M) and Nordstrom (JWN) execs recently presented at an investor conference. Both companies cited inflationary pressure as a reason for sluggish sales and holiday shopping pessimism. Obviously. But both also said something more interesting. From Macy’s: There’s less urgency and more concern over shopping this year. Less urgency because supply chain issues are gone and there’s a little extra time to shop for Christmas and Hanukkah this year versus last. More concern because people are worried about losing their jobs. Leave it to [Elon Musk]( to show corporate America how lean you can really run. Assuming Twitter isn’t imploding as we speak. From Nordstrom: There’s inflation anxiety across demographics, particularly lower-income households. However, Nordstrom says: [W]e still see customers responding to newness and […] higher-ticket items […] For us, it’s not at all about lower prices doing well and higher-priced items not doing well. If anything, it’s the opposite. This jibes with The Juice’s [haves and have-nots economic thesis](. That the spending slowdown hits the cash-strapped the hardest, while consumers on sound financial footing continue to manage debt effectively and spend without much regard for how much things cost. Brought to you by [The Alt]( [Take Your Investments to the Next Level**]( Cryptos… commodities… real estate… startups… They can help you make a fortune. But it’s hard to figure out which to invest in. That’s why we launched [The Alt]( – a free newsletter focused on these and other alternative assets. Each issue shows you the latest trends, ideas, and discoveries happening outside of the mainstream. Ready to learn how to take your investments to the next level? [Click here to sign up for The Alt**]( **By clicking the link, you are automatically subscribing to The Alt newsletter. Unsubscribing is easy. Full disclosures [here](. Consumer Behavior Lay Off the Cheesecake This Holiday Season Key Takeaways: - There’s probably no wrong answer to how consumers will behave this holiday season. - More than ever, it comes down to your microeconomic situation in the face of macroeconomic pressures. - We’re going low end and high end this year, banking on the cash-strapped searching for deals and the relatively wealthy spending at will. Cracker Barrel and Cheesecake Factory both dropped and popped after reporting weak earnings and getting analyst downgrades. Despite tepid outlooks from both companies, maybe investors think the sell-off was overdone. We don’t think so, though. It’s a tough environment for sit-down-restaurant stocks. Let’s toss around thoughts on why, then look at data on how people plan to eat this holiday season. A Typical Suburban Move Picture suburbia. Maybe you’re in it right now. You hit up the local mall (strip, large-format, or both). You shop ’til you drop. Then, as hunger strikes, you get back in the car, drive to the other end of the parking lot, slip the host $20, and snag a table for four at your favorite chain restaurant. Maybe Cracker Barrel or Cheesecake Factory. But if you’re the cautious holiday shopper Macy’s, Nordstrom, and countless others describe, you might skip the dine-in portion of your shopping excursion. And if you’re doing well with money – and pardon the judgment here – you might not want to be caught dead in a Cracker Barrel or Cheesecake Factory. You’re going higher-end, local, or both. It’s the holidays, so even more reason to splurge. Maybe You’re Ordering In According to a November survey from the National Restaurant Association, 89% of consumers who plan to dine in or order pickup or delivery cite deals and specials as the biggest consideration when choosing where to eat. This is one reason we tend to favor [fast-food stocks]( over full-service-restaurant stocks. The former companies are known for their wide advertisement and aggressive promotion of deals. The latter, not so much. Another factor, also related to inflation, is that the cost of food away from home has risen faster than the cost of food at home since August, making eating out less attractive. More tidbits from the NRA (not the National Rifle Association!): - 77% of consumers intend to order food from restaurants this holiday season. - 57% will dine in. 50% will do takeout or delivery. 25% will do both. We predict the well-heeled will do both. And lots of it. The struggling consumer will go the cheap route when eating out (fast food, baby!) or order via an app. While using platforms such as [DoorDash]( (DASH) isn’t always less expensive, consumers, particularly Gen Zs and millennials, might think: - Using them is less extravagant than going to a restaurant. - They can better control costs by searching the entire landscape of restaurants for deals and picking the best one. - They can save by ordering out for the food, but consuming alcohol at home, which is much less expensive than drinking beer, wine, and cocktails when out. The Bottom Line: You might feel that all this data we’ve compiled over the last few months doesn’t make much sense. You’re not crazy. It doesn’t. It’s confusing as hell. But there’s still a straightforward investment thesis to pull from it: Stay out of the middle of the road. Go low end. Go high end. But the middle of the road across consumer retail – including food – just doesn’t have the size, scale, and attendant marketing presence to compete in an environment where a large segment of consumers is cautious and an entirely different segment is spending like drunken sailors. The low end will favor dollar stores and spring for the $5 coffee at Starbucks (SBUX). They won’t blow $100 for dinner at Cheesecake Factory. The high end will go to SBUX, wouldn’t eat at Cheesecake Factory even for the cheesecake, and will happily spring for luxury items and expensive dinners at local restaurants. To this end, we continue to like SBUX, Dollar General (DG), Dollar Tree (DLTR), and DASH this holiday season. If you’re in the mood for risk, look to luxury brands and the chain best known for selling them, Nordstrom/JWN. There might be more to that comment the company made about high-ticket items doing well than meets the eye. 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