Consumer spending headwinds include: significantly higher costs for groceries, gas, utilities and rent; higher interest rates; and an end to the last of the government stimulus (the childcare tax credit expired at the end of December).
Commodity & Labor Costs
Ramping Inflation Prospects
Commodity prices continue to move higher and Brinker expects recent commodity inflation of +3.5% to +4% will ramp-up to HSD during 1H:22 (pressured by pork & chicken). While there is a sufficient supply of chickens, staffing shortages in the supply chain are pressuring processing.
Elevated transportation costs (with an 80,000 shortage in truckers according to the American Trucking Association) further pressures food costs.
Denny’s rule-of-thumb is that 10% commodity inflation can be offset by +2% to +2.5% in pricing.
Also, labor shortages are impacting wage rates and, although the total number of foodservice & drinking places employees continues to grow, it still remains below 2019 levels despite a recovery in industry sales.
Building material prices continue to surge with lumber futures up +39% m/m in December.