Investors could eat up the restaurant industry and sector-related exchange traded fund as the dining sector gains momentum, with Darden Restaurants (NYSE: DRI) revealing better-than-expected earnings.
Year-to-date, the Restaurant ETF (NasdaqGM: BITE), a dedicated restaurant-related ETF, rose 3.9%.
On Tuesday, Darden Restaurants, which owns a group of dining names like Olive Garden, posted better than earnings and topped earnings in each of the past six quarters, reports Trevir Nath for CNBC.
Darden expects sales for the year to expand 3% to 3.5% at established restaurants, with adjusted earnings of $3.48 to $3.58 per share, compared to previous guidance for same-restaurant sales to grow 2.5% to 3% on adjusted earnings of $3.25 to $3.35 per share, the Wall Street Journal reports.
Darden Restaurants makes up 2.8% of BITE’s underlying portfolio.
The hospitality group’s growth may reflect consumer’s changing preferences. Data from JPMorgan Chase Institute revealed that people are spending on experiences rather than shopping, according to the Business Journal. Specifically, most consumers were spending money on restaurants and “other services,” forgoing durable goods and choosing small- and medium-sized businesses over larger ones.
[related_stories]Consequently, as Americans allocate more of their income on dining and spending out, BITE could continue to gain momentum. BITE tracks U.S. listed companies operating branded restaurants, with over 50 of the world’s most recognizable and iconic brands in quick services, fast casual and casual dining.
For instance, BITE includes some recognizable names among its top holdings, including Texas Roadhouse (NasdaqGS: TXRH) 2.9%, Dominos Pizza (NYSE: SPZ) 2.9%, Sonic (NasdaqGS: SONC) 2.9%, Carrol’s Restaurant Group (NasdaqGS: TAST) 2.9% and Cracker Barrel Old Country (NasdaqGS: CBRL) 2.9%.
Additionally, for more diversified exposure, investors can look at the PowerShares Dynamic Food & Beverage Portfolio (NYSEArca: PBJ), which targets food and beverage companies, and PowerShares Dynamic Leisure and Entertainment Portfolio (NYSEArca: PEJ), which includes restaurant names. Additionally, dining and quick services falls under the broader Consumer Discretionary Select Sector SPDR (NYSEArca: XLY). Year-to-date, PBJ was up 0.9%, PSCD rose 3.5% and XLY was 0.4% higher.
Restaurant ETF