Pantry (PTRY) thoughts
I really like this type of business (running gas/convience stores); I'm not sure why. It seems like a low risk business that won't be going anywhere for a while.
America drives less.
Cities are making a comeback which should cut commutes for a percentage of the population but it won't affect those already in the suburbs and plenty of people will still move out to the suburbs. Employee teleworking could also reduce driving. The federal government has already started mandating a percentage of teleworking. Face to face communication being so important still in our society that I doubt teleworking ever gets bigger than 15% of population working 2 days a week from home.
America eats less fast food
Right now there are few signs of this and actually its more the other way around. One sign is that a lot of drink choices are becoming less caloric and contain more vitamins and actually contain protein.
PTRY spent a lot of money in 2006 rebranding to their Kangaroo brand. North Carolina started a state run lottery which will help stores there. Management equates margins for car washes with that of quick service restaurants (QRS). Being that PTRY is a primarily southern company, I'm sure their revenue from car washes has been hurt in the last two years with the water shortages in the south. Dilution seemed reasonable over the last two years with .8% from 06-07 and 1.5% from 05-06 with no share buybacks. PTRY spends a lot in remodeling. They spent 23.4MM on (30) remodels & (5) rebuilds in FY07. They closed 11 stores in 2007 and 24 in 2006. The one reason I can't make myself invest in PTRY is that they have so much debt. They have 78MM in cash and 746MM in debt. They are reducing the amount of stores they buy in FY08 but they still plan on opening several new stores. I don't see how they will reduce their debt while building new stores and remodeling others. They probably spend most in remodeling the year after they buy a new store to bring it up to their Kanagroo standard.
Interesting note that they buy over 50% of their merchandise from Mclane Company a subsidiary of Berkshire Hathaway. They also buy a majority of gas from Citgo.