The Best Short in This Market: Restaurants
by Michael Shulman 10/23/08
Past market drops did not hit restaurant spending hard because consumers saw these as the result of an isolated event -- the crash of Internet stocks or the attacks on 9/11.
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What consumers are seeing and feeling right now is a big slowdown in the economy and a serious drop in their personal wealth -- in home and stock market values -- and they are responding to this reality.
How will this play out?
Our surveys show the trend is to move away from upscale restaurants and either shun outside dining or "move down" to less-expensive places to eat.
As you can see, the big hit is among upscale casual and seriously upscale restaurants.
This makes sense, intuitively, as they are the most expensive and the easiest to avoid. But choosing winners and losers is a lot harder than a first glance would tell you.
Will the diner who abandons The Palm Restaurant (fools that they would be) go eat at Outback Steakhouse? Would they choose to buy a filet mignon for the grill at home?
Will the office holiday party at the Cheesecake Factory (CAKE) end up at Applebee's or the local VFW hall with everyone bringing some food?
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