Five Restaurants Plunging In Value

Posted: Aug 26, 2017

Blog: While restaurant stocks have had a good year, prices for some have come down hard

Restaurant stocks have come down in value over the past few weeks amid weak sales results and concern about the direction of the economy. But they are up on the year, thanks mostly to strong performances by large companies such as McDonald’s Corp., according to the NRN Restaurant Index.

But sales problems and other investor concerns have taken down a number of restaurant companies this year, some of which were not long ago considered industry stalwarts on Wall Street.

Here’s a look at five former Wall Street darlings that have seen their stock prices plummet to multi-year lows in 2017:

Buffalo Wild Wings Inc.
For a long time, the Minneapolis-based chicken wing chain was the great, big hope for casual dining, with a long string of same-store sales increases and seemingly unfettered growth. But the company’s sales took a hit in 2016, and those sales have remained weak this year, taking the stock down from a peak of over $200 per share.

An activist investor, Marcato Capital Management, won three seats to the company’s board earlier this year, but that’s only made things worse. The company’s stock is down to just over $100 per share, down 31 percent year to date and the lowest level in four years.

Biglari Holdings
Toward the end of 2016, the owner of Steak ‘n Shake, and a big holder of Cracker Barrel Old Country Store Inc. stock, was nearing $500 per share. It’s now below $300, after falling 39 percent. It hasn’t been that low in nearly five years.

The problem is all rooted in same-store sales. Steak ‘n Shake’s same-store sales grew for 29 straight quarters until the second quarter of last year. They have now fallen in four of the past five periods, including a 3.2-percent drop in the second quarter of this year, thanks to a 4.3-percent decline in traffic.

DineEquity Inc.
Investors fell in love with this company after it was created when IHOP bought Applebee’s, given its “asset light” strategy of franchising and its limits on capital costs.

But steep sales problems at Applebee’s — down 7 percent in the second quarter — have caused investors to question this model, and the ability of the company to turn it around.

DineEquity stock is below $40 a share. The stock was over $100 in 2015. It is down 64 percent since its peak and is down 47 percent year to date.

Chipotle Mexican Grill Inc.
Not long ago, some analysts wondered whether Chipotle stock could go to $1,300 per share.

The question now is whether it could fall to $250.

Chipotle’s problems with sales declines and food safety are well documented. Investors were growing confident earlier this year that the Denver-based burrito chain was on the comeback trail — the stock was nearing $500 per share in May, up 32 percent on the year.

But concerns about a slowing recovery sent the stock down and then a norovirus outbreak in Virginia sent the stock plunging. The stock is down 37 percent since May, including 21 percent since the outbreak. As such, it is now down nearly 18 percent year to date, and at one point fell below $300 for the first time since late 2012.

Fiesta Restaurant Group
Burger King franchisee Carrols Restaurant Group spun off the company, owner of Pollo Tropical and Taco Cabana, in 2012 and it quietly became one of the stronger industry performers. The stock increased four-fold to more than $64 in early 2015.

But bad sales problems at the two chains have sent the stock plunging. Today, the stock is below $18 a share. It hasn’t been that low since early 2013 — not long after the spinoff.

By Jonathan Maze
August 25, 2017

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