Oil has been just up, up, and away in the recent weeks. With major concerns of Iran and the possible threatening of supply, oil traders are worried and running up the prices. The indices are still threatening the bear by attempting to break through the resistance levels. With such great performance from the restaurants over the past few months, one should wonder: Will they be the leg that drags us down? Take a look at Buffalo Wild Wings and Chipotle.
What do those graphs tell us? They tell us a very simple idea; that the restaurants perform well when Americans have money to burn, and they perform poorly when oil is expensive.
With cheap gas prices and a cheap winter (cheap oil, not very cold) restaurants have fared well. This will all change momentarily with the new increased price of oil. Many forget that the recessionary consumer has been plagued with a tight budget before and has learned how to pinch pennies. As I referenced in The Real Walmart Story (Featuring Dollar General)
the consumer knows how to combat these higher prices by changing their shopping habits. So those that expect continued good results from their restaurant picks, need to either reconsider their positions, or buy some oil to hedge.
“If you or me go to the gas station to fill up our car and it costs us much more than we expected, it will zap our discretionary income. We won’t have the extra money to buy that washing machine or new winter coat-all big ticket items that are important to economic growth.” – Maria Bartiromo