After a somewhat surprisingly solid 2021 for restaurant stocks, the first two months of 2022 have been choppy. It's an interesting dynamic. Consumers appear eager to eat outside the home again after facing pandemic-related limitations the past two years, but that renewed interest comes against a backdrop of rising prices, smaller portion sizes and limited staffing that forces longer wait times.
A basket of 40-plus restaurant names with market caps in excess of $100 million are down about 5.7% year to date, though that's still better than the S&P 500 (down 7.8%), Russell 2000 (down 9%) and Russell Microcap (down 9.1%).
A recent meal at a Bloomin Brands' (BLMN) Bonefish Grill location told the tale about present-day restaurant experiences (and while one visit is not a relevant sample size, I've had several similar occurrences). The place was absolutely packed, but seemed to be slightly understaffed. It was a great meal for sure, but I did notice the portion size was rather small, especially for the $35 I shelled out for a piece of Chilean sea bass and a couple sides. That's the world we are living in, and it will likely get worse before it gets better.
Bloomin Brands is up 19% year to date, which makes it second-best sector performer so far this year, just behind Ruth's Hospitality Group (RUTH) (up 22%). Brinker International (EAT) (up 17%), a member of my 2022 Tax Loss Selling Recovery Portfolio, is in third place.
The "Big Five" -- a self-coined group that includes McDonald's (MCD) (down 7%), Chipotle Mexican Grill (CMG) (down 14%), Yum Brands (YUM) (down 10%), Domino's Pizza (DPZ) (down 24%) and Darden Restaurants (DRI) (down 3%) - are down an average of about 12% for the year.
Last year's top performer Kura Sushi (KRUS) , which rose 315% in 2021, is the worst performer year to date (down 36%). Portillo's Inc. (PTLO) (down 24%) and FAT Brands (FAT) (down 28%) round out the worst three. FAT, which operates Fatburger and Johnny Rockets, fell 30% last Tuesday after it was disclosed that CEO Any Wiederhorn has been under investigation by the Securities and Exchange Commission.
Portillo's, a Chicago street food restaurant that went public last October, is among a handful of 2020/2021 restaurant initial public offerings. Portillo's went public at $20 a share, hit a high of about $58 in November and closed last Friday at $24.62.
Markets have not been kind to other restaurants that debuted in the last year or so. BurgerFi International (BFI) , which went public in December 2020, has had a very rough run and is down 66% over the past year. Sweetgreen Inc. (SG) , which went public last November at $28, quickly rose to $53 but closed last Friday at $24.13. Drive-thru beverage seller Dutch Bros. (BROS) has bucked that trend; its shares closed last Friday at $47.25, well above the $23 IPO price last September. However, the ride has been wild; BROS briefly traded above $81 in early November.