Food Cost Deflation Looks Likely, Says Analyst

Truist Securities analyst Jake Bartlett said the core building block of restaurant commodity costs, grain prices, are expected to decline.
Declining feed costs are encouraging, but rebuilding the herd takes time, added the analyst.
Chicken prices are expected to be down sharply in 2023, but to increase in 2024 as trade down from beef boosts demand.
Despite the recent news on avian flu outbreaks, the analyst expects egg prices to be down sharply in 2023 and 2024.
Industry expert Datum FS' David Maloni expects commodity deflation in '23 for all key commodities, aside from beef.
For Texas Roadhouse Inc TXRH (Buy rated, $110 Price Target), the analyst cites slower-than-expected economic recovery post-COVID, low off-premise sales, and operating cost inflation as possible risks.
The analyst said consumer demand in Shake Shack Inc's SHAK (Buy rated, $67 Price Target) urban markets may never fully recover due to work from home, urban flight and depressed tourism.
New store volumes and margins may disappoint as SHAK fills existing markets and enters smaller ones.
Chipotle Mexican Grill Inc CMG (Buy rated, $1,800 Price Target) may face heat from increased competition, operating inflation and reputational risk.
Darden Restaurants Inc DRI (Buy rated, $163 Price Target) could face issues like operating inflation, return of COVID outbreak, and macroeconomic headwinds.

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