Analysts Worry Over Restaurant Profits

USDA Says Commodities Prices Up in Oct.
USDA Report Shows Higher Commodity Prices in October; Analysts Worry Over Restaurant Profits

I am now officially worried about my stagflationist stance. I really don't like being on the same side of the fence as the analysts.

The All Farm Products Index _ comprised of livestock and all crops sold by farmers _ rose 23 percent from October 2006.

That sounds extremely alarming unless one remembers that last fall there was a rather massive commodity selloff. Let's look at the long-term inflation adjusted chart of that index to see just how alarmed we should be.



I think the word concerned certainly comes to mind based on the apparent trend reversal (hence my stagflationary name), but not quite a 1973 oil embargo level alarm. Just a thought.

Meanwhile, unfavorable weather and crop and animal diseases abroad have boosted international demand.

Here we go. We're officially blaming the weather again instead of a more likely culprit, namely that we ship our money and jobs overseas with our massive trade deficit and they in turn wish to buy our food.

Robert W. Baird & Co. analyst David Tarantino said beef prices, which make up 45 percent of the company's cost of sales, "remain an uncertainty for 2008" since the company doesn't have a long-term contract in place that would lock in a set price.

If the chain were to buy its beef at current prices, it would be paying $2.60 more per counterweight than last year at this time, according to the report.

$2.60 per counterweight! Oh my! Hold on, what's a counterweight? It wasn't an easy one to track down. I'm pretty sure it is hundredweight, or CWT. That's 100 pounds as seen here. That means the chain would be paying an extra 2.6 cents per pound. Suddenly it doesn't seem so alarming.

Shares of Chipotle slipped less than 2 percent this week to end at $131.68 on Friday, while shares of Buffalo Wild Wings dived 22 percent to end at $30.61. Buffalo Wild Wings reported third-quarter profit below analyst expectations on Tuesday.

Did costs do it or was it something else?

UPDATE 2- Buffalo Wild Q3 earnings miss analysts' view
The investors may have been disappointed by the company's comments on its same-store sales trend in the fourth quarter, Morgan Keegan analyst Destin Tompkins said by phone.

It seems to me it was the dissapointing sales trend on a richly priced stock that might have been the actual problem, but hey, I'm no analyst.

Tompkins said the 4 percent rise in same-store sales "is less than half of what they were in Q3 and... below where people expected Q4 to start." Tompkins has a "market perform" rating on the stock.

How about Chipotle? Any fears there?

Is Chipotle Overstuffed With Optimism?
After all, it's trading at a whopping 82 times trailing earnings and 55 times forward earnings.

No worries. The extreme pessimism that people say is keeping the market down is sure to turn at some point. *extra sarcasm*

Source Data:
NASS: Agricultural Prices