TheMacroStrategist

Take Away: Restaurant Spending Continue to Decline

Short
NASDAQ:BLMN   Bloomin' Brands, Inc
September's retail sales increased less than expected, partly due to the 1.8 percent decline in restaurant spending. This was the worst decline since 2016. Partly blamed on Hurricane Florence, that static is likely to be tuned out and the trend of mean reverting to continue after Q2-18's record $3.5B in sales - the strongest in almost 30 years.

BLMN is expected to report earnings of .07 cents on October 29, but we should focus on the reality that comps are likely to disappoint following such a great second quarter. We're seeing weakening comps in strong companies like DPZ and DRI .

Moreover, Bloomin' has board & mgmt issues that remain unresolved.

I believe their is more of a macro play to restaurants, though. Real consumer spending has outpaced real disposable income two of the last four months, but there has been little movement in disposable income. Furthermore, food and beverage spending has followed both the trajectory of U.S. inflation and growth gains since the 2016 election.

Q4-18 could be a difficult one for U.S. consumers and restaurant spending could decline in order to fund other consumption.

Earnings matter, but this is a trend call.