We're Sticking with a Top Casual-Dining Pick
Plus, Anheuser-Busch forges promising alliance, Intuit strikes a deal, and more.
Applebee's (APPB) on Monday reported relatively weak November comparable sales. The grill and bar chain's same-restaurant sales fell 3.1% for the four weeks ending on Nov. 19, down from the 0.8% and 1.2% declines in the September and October periods, respectively. Morningstar analyst John Owens is a little disappointed with the weakening sales trend that's played out over the last few months, especially given the drop in gas prices and the chain's recent rollout of new menu items from celebrity chef Tyler Florence. However, Owens points out that Applebee's was lapping a menu price increase of approximately 1% and a higher-priced promotion during the last two weeks of the November 2005 period. The prior-year period also benefited from an additional week of advertising. Nevertheless, Owens thinks increased competition in casual dining may have weighed on Applebee's results as well, with rivals ratcheting up their use of coupons, discounts, and value promotions. Thus, while he's still optimistic about the company's long-term prospects and maintaining his fair value estimate for now, Owens will continue to keep a very close eye on its future performance.
Full Analyst Report: Applebee's International
Anheuser-Busch to Import InBev Brands
Morningstar analyst Matthew Reilly thinks Anheuser-Busch (BUD) made a wise strategic move in reaching an agreement with InBev to import, distribute, and promote several InBev brands, primarily European imports, including Stella Artois, Beck's, Bass, Hoegaarden, and Leffe, effective Feb. 1, 2007. Although the economic terms of the deal have not been released, explaining why Reilly is leaving his fair value estimate in place, he thinks the agreement puts Anheuser-Busch in a better position to leverage its unparalleled distribution network in the U.S. And while the volume of the InBev brands was equivalent to only about 1.5% of Anheuser-Busch's total domestic output, Reilly points out that the inclusion of the brands should pacify the company's growth-starved distributor base and provide a source of incremental earnings. What's more, since Anheuser-Busch has opted to import and distribute only those brands that are unlikely to compete with its core offerings or products from Grupo Modelo (in which the company has a 50% interest), he thinks that the cannibalization risks are manageable at worst.
Full Analyst Report: Anheuser-Busch
Jeffrey Ptak has a position in the following securities mentioned above: JNJ. Find out about Morningstar’s editorial policies.