Episode Transcript
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Speaker 1 (00:00):
Welcome back to another episode of The Restaurant Report. My
name is Paul Barron. I'm going to be your host today,
and today we're going to be diving into the issue
of tariffs and the restaurant industry. The impact could be
the largest ever in restaurant history. You don't want to
miss this one. We'll be right back. This episode is
(00:26):
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back here on the restaurant Report. Welcome in you guys.
I want to kind of cover a couple of things here,
and I think with the issue of what's happening right
now in the trade wars between primarily the US and China,
(02:18):
the issue is starting to play out in a very
unusual turn of events for the restaurant industry, and we're
going to talk about that today on how this is
going to impact brands, What kind of potential exposure is
here for the restaurant industry as well as the stocks
of the publicly traded food companies as well. So we'll
break all that down for you guys. I want to
share one story with you to kind of get you,
(02:40):
guys float into the topic. And one of the things
when you look at where these retaliatory tariffs have started,
the biggest issue has been all around China. Now, part
of this has been just the issue of the trade
and balance, and if you consider where China is against
the US in terms of trade imbalance. Remember the United
(03:01):
States holds twenty five percent of the world's GDP. That
is a significant impact on the industry. And I think
this is going to play out. I think for the
industry maybe not very good. This could be the worst
summer for restaurants in the history of restaurants sales. And
(03:22):
I will to break it down for you. This right
here is what I'm talking about. China slaps another eighty
four percent retaliatory tariff on Trump's US goods interpose in
response to Trump. Now, remember sure, this is eighty four
percent against because remember it was thirty four percent earlier
this week. Let me zoom it on that for you guys,
so you can kind of see a little bit closer
what's going on, because it started on thirty four percent,
(03:44):
that was on April tenth, and this of course has
now been a response from the one hundred and four
percent tariffs that came out of the administration. And of
course this impact not necessarily directly on where food is
going but and the rest our industry, but the rolling
impact on technology products, possibly some goods that make up
(04:07):
many of the services and areas that in the industry
really requires, I think is the factor that we're talking
about here, and when if you look at this in
comparison to the rest of the industry. I want to
play this clip for you guys right here. Let me
go into it.
Speaker 2 (04:22):
The markets. In just the last few minutes, China coming
out with these headlines saying it's the next step in
the trade war. It's going to be imposing retaliatory tariffs
of eighty four percent on US goods that starts on
April tenth. As a result, the futures sold off. You
could take a look if a tick by tick, the
Dow futures are now down by about the six hundred
and sixty points, SMP futures are off by seventy three,
(04:45):
the Nasdaq down by close to two hundred points. Again,
on a percentage basis, you are now talking about drops
of one point eight percent for the Dow, one percent
for the Nasdaq, and one and a half percent for
the S and P five hundred. It's playing out in
Europea equities as well. Take a look at those prices
a little weaker than we were before this. We were
(05:05):
down by about three percent for most of the major
averages at this point. The German DAX is down by
three point eight percent, so is our Italian stocks. In France,
the CAC is off by three quarters percent, and then
the foot See is down by about three point four percent.
Check out energy prices as well. You're seeing a steep
(05:26):
drop in energy prices once again this morning, a decline
of six percent from WTI. It's actually trading at below
fifty six dollars a barrel. Brent crude is below sixty
dollars a barrel at fifty nine to nineteen natural gal.
Speaker 1 (05:40):
All right, I'm gonna stop it there, you guys can
kind of get a quick question or a quick look
at what I'm talking about. From the impact side of this,
this sift course is going to have reaching impact across
the industry, and I think the factor that we all
have to look at is how is this going to
impact other areas of the industry itself. One of the
things that is under concern right now now is even
(06:02):
the state associations. I've talked to several of the state
associations just in the last week. One of the biggest
issues is how long we can get on some of
these delays, Like for instance, Iowa right now, their restaurant's
bracing for higher costs on US terras. This is of
course threatening supply chain and some of them that they're
looking at. When you look at the supply chain side
(06:24):
of this, many of the analysts believe that the restaurants
have to reprice. And if we get into repricing in
a time in which we've already seen a large amount
of price taken from the restaurant industry, then the question
will be can the American consumer handle it. The National
Restaurant Association to acknowledge that these challenges now could represent
(06:49):
one of the worst eras in the restaurant industry, especially
as you start to look at things like Europe, because
remember Europe is a large importer, as as is China
or excuse me, Mexico and Canada for goods and services
here in the US, primarily especially on the produce side.
Then you take into a consideration what we'll see in
(07:10):
terms of the wine artists and spirits, that effect will
happen in of course casual dining on up. And then
the factors I think is when you look at what
markets win in this period of time, well many would
look to QSR. We'll talk about that in a second.
One of the other big issues right now is Chipotle.
(07:32):
Chipotle of course falling dramatically, and one of the things
with Chipotle that I think a lot of people are
considered with is can Chipotle's position continue to hold as
the leader? As we know, the stock has already faced
a pretty significant downturn. The biggest question on Chipotle is
whether or not the price can hold with the current
(07:55):
rate in which these price increases will affect American consumers.
I was on this show just a couple of weeks
ago with Sam Ocus from Nation Restaurant News, and he
kind of hit on that very point, was that the
issue when you look at price and whether or not
it's going to be a factor going forward, which I
believe it will, the issue is how quickly can these
(08:18):
brands rebound, especially with consumer sentiment at the pace in
which it is right now, because many people would say, well,
wait a minute, we're potentially hitting an era of consumer sentiment. One,
it's the lowest it's ever been in quite some time.
And then if you look at the scenario of consumer
(08:39):
sentiment on restaurant brands within our own power indexes, which
is where we measure consumer sentiment, this again has reached
a low that goes all the way back to COVID.
We are literally just one or two points away from
possibly hitting the COVID low on overall sentiment in the
restaurant space. And if that is the case, then of
(09:00):
course we could see a pretty devastating summer going forward. Now,
other brands that I am concerned about, and I want
to go over to the charts real quick, and I'll
share this with you guys, because we can also chart
some things just so you can kind of see a
little bit of where the charts are moving, and I
want to play on Tyson. We'll go ahead maximize that.
(09:24):
So what I'm looking at here, of course, is Tyson Foods.
If you look at the amount of bleeding that Tyson
has had just in the period of time that has
been just the last week, coming down to currently trading
right now at fifty seven dollars, that's almost down ten percent.
The question is whether or not Tyson can hold on
(09:47):
with these tariffs impacting them. But if you look at
the rest of the market, McDonald's somewhat holding sideways, this
of course is a little bit elong and but you
can see this situation right there Chapaul a little bit
of a different trend that we're seeing right now. Chipotle
consistently down. However, this may be the point of return
(10:09):
now for Chipotle, and that, of course, I think only
depends on whether or not the United States enters into
a recession. Cavo one of the few brands that has
been sideways after a deep decline going all the way
back into February. And then if you look at Apoyo
Loco another one also in decline. Almost everything Shakeshack also
(10:30):
in decline, Starbucks significantly in decline. Their customer account has
continued to fall over the last several months. The question
there with what's going on right now with Brian Nickel
is whether or not they can retain the current customer
base or can they do something around trying to win
(10:51):
new customers. That's where I think things are going to
get a little dicey right now. Wendy's also in decline.
Red Robin absolutely calling off a cliff here now, trading
at two sixty nine. If you look at where this
stock has been before, it is getting down to some
of its lowest measurements ever. Earnings on this one, of course,
is the biggest issue right now. Their executives are selling
(11:14):
shares to cover their tax obligations. Also, inflation and tariffs
are scaring shoppers, and this is what most everybody is
facing right now. Let me know in the comments of
whether or not you guys think that we are going
to continue to see these pressures moving into the space
on tariffs and the impact on the restaurant industry, because
(11:38):
I think this is something that you have to factor
in in your strategies of how you're building your brand
and also how are you growing right now? This could
open up several new areas. One of course, is going
to be real estate options that may end up flowing
into the market. If this becomes a very slow summer,
then the opportunity going to the next level for restaurant
(12:01):
operators could be very similar to two thousand and eight,
like it was in fast casual and you look at
that the great financial crisis in two thousand and eight,
many people thought the restaurant industry was going to see
a pretty much a nuclear winter, but instead what we
saw was a rebirth or a birth i should say,
of the fast casual category that made that sector grow
(12:23):
so much. Now QSR is going to be the winner here.
I believe McDonald's is the big winner here. Overall, Chipotle
will possibly come back into a position. Starbucks, I think,
is going to continue to hold a downward trend for
quite some time. And as we start to look at
other sectors, emerging brands and also businesses that are out
(12:48):
there that are just now getting into growth parameters of
their business in terms of both tech companies and also
emerging brands from the restaurant side, remember that you guys
can reach out to over on saver FM, which is
where you can catch this podcast and many more. One
of the things that we do over there that you
may not be aware at Saver Capital is we of
(13:10):
course are now investing heavily, so go over to our
Saver Capital and Advisory page. You guys, of course can
seek out advisory or if you're an emerging brand in
fast casual, this could be a section for you to
jump into, and that is if you're looking for cattle
or a capital or capital advisory. Another thing I want
you to check out is some of the other podcasts
(13:31):
because we have a slew of great podcasts that you
guys can check out, Restaurant Mastermids which comes out every Thursday,
Catering Cage on Tuesdays, and also Fast Casual Nation on Wednesdays,
So make sure and check those out. We've got a
lot of growth in the podcast side of things, the
Restaurant Report. I love to get your insights on where
(13:52):
you guys think this is going. You can always hit
me up on Twitter, which is just app Paul Barron
I talk a lot about finance and growth of this
market along with other tech and blockchain markets out there.
To make sure and follow me over on x and
we'll catch you next week, right here on the restaurant report.