Restaurant Conference Recap: Omicron Having 'Limited Or Neutral' Impact On Demand

Bank of America restaurant analyst Sara Senatore recently attended the ICR 2022 conference and viewed presentations from 39 different restaurants. On Thursday, Senatore said the industry will continue to face unique challenges in 2022.

Labor And Costs: One of the biggest problems restaurants are facing in the coming quarters is a lack of workers, but Senatore said most restaurants are seeing labor market conditions improve slightly.

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At the same time, she said most restaurants are doing their best to avoid passing on rising costs to their customers and are instead choosing to prioritize value items and traffic growth.

While rising costs and labor shortages are headwinds for restaurant operators, off-premise consumption, including digital ordering, curbside pickup and to-go ordering, will continue to be a tailwind and has remained sticky even as dine-in businesses have recovered.

Omicron Impact: Restaurant stock investors also got some good news on the impact of the omicron variant of COVID-19.

"In response to questions around the omicron variant, restaurants broadly characterized its impact to demand as muted or neutral," Senatore said.

She said many larger restaurants are now much better positioned to capture off-premise demand than they were during the early days of the pandemic, potentially limiting risk in the event that the omicron outbreak worsens.

Earlier this week, Senatore highlighted Dutch Bros Inc BROS as a top restaurant stock pick for 2022. Bank of America also has buy ratings on Starbucks Corporation SBUX, Portillos Inc PTLO, First Watch Restaurant Group Inc FWRG, Krispy Kreme Inc DNUT and Domino's Pizza, Inc. DPZ.

Benzinga's Take: Nearly two years after the COVID-19 pandemic blindsided the restaurant industry, the virus continues to dominate the investment themes in the industry and has a significant impact on demand and costs. At this point, some restaurants have adapted and navigated the pandemic far better than others, making restaurant stock selection extremely important.