U.S. Restaurants:

Navigating the Recovery Toward Pre-Pandemic Levels

August 23, 2021

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Key Takeaways

  • 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.

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