Blue Red Robin

November 18, 2010
Red Robin Downgraded

The company expects negative same store sales and cost inflation in the fourth quarter of 2010. We thus remain apprehensive regarding the stock in the near term, given eroding margins and lagging same store sales due to a decline in traffic.

...

Moreover, the stiff competition from other resturants...

What's Ben Bernanke's solution to the problem?

1. Decrease same store sales.
2. Increase cost inflation.
3. Increase stiff competition.

Genius!

That's not what he's saying he's trying to do but let's think this through.

1. Ben Bernanke believes that devaluing our currency should lead to more investments. He wants more growth. All things being equal, more investments in the restaurant industry should lower same store sales and increase competition.

2. Ben Bernanke believes that devaluing our currency should lead to more inflation. He wants more inflation. All things being equal, that should lead to higher commodity prices and increased cost inflation.

I continue to remain bearish on our overall "resturant" industry.

Some might argue that "Resturants" is not actually a word. However, if we can't trust the financial experts to give us 100% accurate information 100% of the time, then who can we trust? ;)