Consumer Discretionary

Report by Quo Vadis Capital

John Zolidis reiterates his bearish view on CAKE, warning that the multi-year tailwind from aggressive menu price hikes is ending. From 2023-2025, the company raised prices by over 20%, boosting restaurant-level margins to an 8-year high despite a ~5% decline in traffic. However, pricing is set to decelerate to 3.5% in 2H25 (vs. 4.0% in H1) and that slowdown doesn’t account for the rollout of new, lower-priced menu items. Meanwhile, non-core concepts continue to dilute margins. After reviewing Q2 results, which featured a 1.2% comp and 7% EPS growth (the slowest in 3 years), John sees little justification for the stock’s 30% rally over the past 3 months.

Report by MYST Advisors

While MYST’s generalist events typically offer a diverse set of ideas, they were shocked by the extremely high percentage (>70%) of Consumer-related Shorts (Cheesecake Factory, Dollarama, Ebay, Elf Beauty, Hertz, O'Reilly Automotive, Simply Good Foods, Utz Brands) presented last week! Other themes included companies facing funding issues (AST SpaceMobile, Hawaiian Electric Industries, HTZ) or exhibiting accounting red flags (CAKE, EBAY, UTZ) and stocks priced for perfection (CME Group, DOL CN, Loar Holdings, ORLY).

The ideas presented at MYST’s previous Bear’s Den Forum (Jun 24) dramatically outperformed over 1-month period (~71% hit rate, +7.4% average alpha).