Restaurant stocks rise on signs of spike in inflation (NASDAQ:WING)

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The restaurant sector was among the best performing sectors on Thursday after a strong report from Wingstop (NASDAQ: WING) provided indications that commodity prices could decline.

Inflation has been a major concern in the of space for much of 2022 as price hikes have raised suspicions of demand destruction and declining trade from sit-down restaurants. In effect, Chipotle Mexican Grill (GCM), McDonald’s (MCD), BJ’s Restaurants (IRBJ), and others have all announced price increases that will continue through the end of 2022.

“Our models assume little food cost relief on the horizon given the contraction and ongoing geopolitical concerns/commodity volatility,” RBC analyst Christopher Carril wrote in a recent note. “On the job front, recent company feedback and BLS data suggest that staffing levels have recently improved, and while we believe this could potentially lead to Y/Y wage pressures easing over the 2H of the year, we always hear about pockets of labor pressures. ”

However, a report from Wingstop on Thursday morning that noted a sharp 18.8% decrease in the cost of bone-in chicken wings served as an indication that commodity costs could come down. Additionally, the company offered upbeat comments on labor costs, a concern that may also ease as the economy slips deeper into a recession and the labor market eases.

During Wing Stop (WING) +21.06% led the gains on the day as consumer discretionary stocks generally surged, many restaurant stocks took off alongside. Major winners included Shake Shack (SHAK) +7.66%Dutch Brothers (BROS) +9.29%Gates (PTLO) +7.54%Darden (DRI) Restaurants +3.98%BJ Restaurant (BJRI), Sweetgreen (SG) +5.1%Papa John’s (PZZA) +4.75%Dinner Marks (DIN) +3.22%Denny’s Corporation (DENN) +4.48%Cracker Barrel (CBRL) +3.28%Cheesecake Factory (CAKE) +5.04%Brinker International (EAT) +8.51%Jack in the box (JACK) +5.74%and Bloomin’ Brands (BLMN) +5.63%.

Learn more about longer-term restaurant inventory trends.

Carol N. Valencia