April 23, 2018 11:45 pm eastern time, 5:45 pm in Amsterdam

Statistics Canada released figures for February sales at food service and drinking places. This is relevant to the prospects for Boston Pizza units and other restaurant stocks.

February sales in Canada were up 4.4% in February versus one year ago. Ontario was a key driver as it was up 4.9%, Alberta was weaker with only a 1.2% gain. B.C. clocked in at a hard-to-believe 9.8% gain.

Of the 4.4% increase in Canada 4.0% was due to price inflation meaning that volume was up only 0.4%. This is consistent with my expectations as stated earlier. It seemed likely that higher minimum wages especially in Ontario would push up prices in restaurants.

This should benefit Boston Pizza (and similar entities) where the distributions to unit holders are driven almost entirely by same-store sales growth and it does not really matter if the growth is due to prices or volume. Ultimately it is better if volume goes up indicating popularity. But mathematically distributable cash goes up with price increases. Ultimately also the franchisees need to do well and it will be an encouraging sign if the BP restaurants have been able to pass on wage increases in the form of higher prices.

I am hopeful that BP will report gains in distributable cash flow per unit in Q1. There are always risks in terms of a weaker economy and stretched household budgets but so far it appears that people are still spending apace (i.e. 4.4% higher than a year ago February).