We believe the U.S. restaurant industry has made some notable strides on the road to recovery across its various sub-segments, with same-store sales notably among the indicators that are now at the cusp of their pre-pandemic levels. The latest Q2 2021 earnings report mostly showed a sales acceleration that could be sustainable through H2 2021 and into 2022.
A recent surge in seated diners portends significant pent-up demand with an easing of dining restrictions. But, this comes amid an intervening overhang of the Delta variant, which threatens to delay or derail the recovery.
With the overall equity performance for the restaurant sub-index notably tracking the broader market rebound since its earlier bottom with the onset of the pandemic in mid-March 2020, equity valuation multiples are relatively elevated versus their pre-pandemic levels. We highlight CAKE, DRI, PZZA, and SHAK among the names whose fundamentals should support the outlook for further industry recovery.