Keep The Main Thing, The Main Thing

Keeping the main thing, the main thing was the only way to stay positive in the maelstrom of negative headlines this year.

Any honest investor will readily admit that the incredible volatility in the economic data was undoubtedly challenging. Rising rates, the risk from the start of credit card payments, an uptick in card delinquencies, and a seasonal consumer slowdown were concerns in the second half. (The consumer just returned to a pre-covid seasonal spending pattern was the key differentiated insight). 

However, these are secondary indicators. 

While a great historical gauge, an overreliance on the Leading Economic Index (LEI) has misled investors this cycle. Despite the LEI staying negative for 17 months, the U.S. exposure to rates (housing) and manufacturing is low.    Ultimately, the consumer is in charge. 

Eating out data is the ‘Main Thing’.  It is the critical co-incident indicator.  Pairing slow-moving government data with various Company updates has kept me on the right side. 

Eating-out sales improved in November, validating this belief, again.

Source - Census.gov

Darden, a broad public company measure for restaurant sales, validated this data in its earnings release today. Olive Garden’s same-store sales (SSS) increased by 4.1%, Long Horn Steakhouse’s SSS increased by 4.9%, while Fine Dining declined by 1.7%.  On a consolidated basis, SSS increased by 2.8%. 

The consumer is “resilient, but slightly discerning” was the quote from the call that summed up the consumer. 

Source - Darden Inc

Always keep the main thing, the main thing.