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