Russia’s invasion of Ukraine on Thursday sent major commodity prices soaring on Thursday, depressing stock prices and adding even more inflation concerns for the country’s restaurants.
Operators, however, do not yet seem worried about the impact the invasion could have on their own supplies. “We don’t see any operational disruption on the horizon,” Papa Johns CEO Rob Lynch told investors Thursday. “I wouldn’t expect our business or our stocks to be really impacted outside of the macro impact on the market in general. It really won’t have a big impact on our situation or, proportionally, on our finances. .
Still, there were plenty of signs that the invasion could create further problems for commodities down the road.
The price of oil has soared to levels not seen in nearly eight years. The price of a barrel of crude oil rose 6% on Thursday and is now at levels not seen since 2014.
Corn prices also climbed to over $7 a bushel on Thursday. Corn prices had trended lower more recently.
These two products are vital for the country’s food basket. High corn prices mean higher prices for animal feed, which leads to higher prices for proteins like beef, pork and chicken. Oil prices also contribute by making it more expensive for suppliers and distributors who supply food to restaurants. And they have the dual impact of raising prices for the consumer and hurting their discretionary income.
The price of a gallon of regular gasoline topped $3.54 a gallon on Thursday, according to AAA. That’s a 6% increase from last month. It also increased by more than 30% compared to last year.
Russia launched an early morning attack on Ukraine on Thursday after months of military buildup and days of negotiations and ominous predictions from Washington that such a move was imminent. Thursday’s reports suggested bombings all over the country.
At home, higher prices have added to concerns about the state of inflation, which has been a problem for restaurants and their consumers for several months.
Investors hit stocks hard early Thursday. The S&P 500 stock index was down 1% through the end of the morning. But that was an improvement from the start of the day, when stocks were down more than 2%.
Most restaurant stocks were down Thursday morning. But many have also recovered. When Lynch made his comments above, in fact, his company’s shares were down more than 9% in pre-market trading, at least in part out of fear of the impact the invasion might have on his company’s raw material costs. By the end of his comments, the stock was down just 3%.
At the same time, prices were inflated for a while and consumers continued to spend. Many operators raised prices and saw consumers continue to order pizzas, burgers or steaks.
Perhaps no chain is as sensitive to gas prices as Cracker Barrel, the freeway side family restaurant chain. The company is keeping an eye on gasoline prices, noting that they are contributing to an inflationary environment that is eating away at consumers’ discretionary income despite rising income levels.
“To some extent, we think people have become more accustomed to generally higher inflation right now,” Chief Financial Officer Craig Pommells said, according to a transcript on financial services site Sentieo. “We believe this will mitigate what we would normally see at least in gas prices. Now, if gas prices rise significantly from here, that could change the outlook.
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