Market Overview

Morningstar's Restaurant Analyst Projects Further Store Closures In Sector

Morningstar's Restaurant Analyst Projects Further Store Closures In Sector

The restaurant sector could see a changing dynamic in the marketplace in the back half of 2018 from an unusual suspect:, Inc. (NASDAQ: AMZN), according to Morningstar.

The Analyst

Morningstar senior restaurant analyst R.J. Hottovy discussed the restaurant sector during CNBC's "Squawk On The Street" Tuesday morning.

The Thesis

Amazon's acquisition of organic grocer Whole Foods could send a "ripple effect" across the entire restaurant sector, Hottovy said. Amazon will push its Whole Foods business more aggressively, and lower grocery prices could cause restaurant patrons to question the value proposition they receive when dining out when it could become even more affordable to eat at home, the analyst said. (See Hottovy's track record here.) 

Restaurant chains including Chipotle Mexican Grill, Inc. (NYSE: CMG) and Starbucks Corporation (NASDAQ: SBUX) already announced store closures, but the list of restaurants closing stores could expand, Hottovy said. Without singling out specific names, several casual and fast casual names could follow Chipotle and Starbucks' lead in closing underperforming stores, he said. 

Restaurants could face continued challenges in how to best integrate new technologies into the dining experience, he said. 

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