Carrols Restaurant All Set To Capture Sales & Optimize Margins, Analyst Says

Stephens analyst Joshua Long has reiterated an Overweight rating on the shares of Carrols Restaurant Group Inc TAST with a price target of $3.00.
Ahead of ICR, Carrols pre-released better-than expected same-store sales at both brands with Burger King trends coming in ahead of consensus expectation by +1.6% and Popeyes trends coming in ahead of consensus expectations by +5.4%, the analyst said.
The analyst believes these results are also impressive in light of both brands facing relatively tougher comparisons in the prior year November/December periods.
Further, the analyst finds the Burger King results encouraging as the brand still remains early on in the process of capitalizing on its recently introduced "Reclaim The Flame" and the "You Rule" campaigns.
As these platforms gain additional momentum, the analyst believes further sales strength could build.
That said, the analyst also recognizes that the lower relative levels of promotion Y/Y alongside relatively high levels of price could also prove to be a relative headwind near term.
The analyst believes inflation continued to be a headwind in Q4, however, the analysis suggests that both commodity and labor pressures remain elevated in absolute terms but continue to moderate on a relative basis from peaks seen earlier in FY22.
The analyst believes margin expansion may not normalize until FY24/FY25. The analyst thinks staffing levels and business normalization can help balance out some of these pressures over time.
Although food costs remain elevated versus historical levels, the analyst believes that relative improvements on a Y/Y basis could start to materialize towards the 2H23 period.
The analyst's favorable outlook is balanced against ongoing pressures from food and labor costs and the company's need to select a permanent CEO.
Price Action: TAST shares are trading higher by 8.03% at $2.02 on the last check Friday.

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Carrols Restaurant All Set To Capture Sales & Optimize Margins, Analyst Says

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