(Go to http://www.financialwire.net/?s=drtjby for more Duarte commentaries.)

May 5, 2010 (FinancialWire) (By Dr. Joe Duarte) — It’s kind of interesting that Brinker International (NYSE: EAT) announced that it was selling its “On the Border” chain of Mexican restaurants a few days before “Cinco de Mayo,” as Texas Roadhouse (NASDAQ: TXRH) joined Buffalo Wildwings (NASDAQ:  BWLD) and Panera Bread (NASDAQ: PNRA), in surprising analysts with less than rosy outlooks for the near future.

The stock market rallied on 5-3 behind a robust ISM manufacturing index and the heralded return of the consumer to the economic recovery. Yet, the data is backward looking, and more current information does suggest that a slightly different take is worth considering. And as the action on 5-4 showed, this is a fickle market.

We’ve been bullish for a while, but as we look around  we're becoming skeptical about the ability of the economy to sustain its recovery without something more tangible to drive it, such as jobs, and less of a threat of higher taxes. Call us old fashioned, but there you have it.

Over the last few weeks, one of our running themes has been the relationship between the casual dining sector and the consumer. It's fairly clear that when consumers are upbeat about their prospects, they dine out more often. Yet, lately, when things have seemed bleak, we had on many occassions scratched our heads about the large crowds in restaurants such as Texas Roadhouse and Panera Bread, among others.

In a piece here, on March 8, we noted: "it was a huge surprise when this scribe trucked the family to the Texas Roadhouse (NASDAQ: TXRH) in Mesquite at 5:30 in the afternoon, and the place was already packed with about thirty to forty people waiting outside and inside at any one time to get a table." In April, we were in Wichita Falls, TX, and we visited another Texas Roadhouse restaurant. The crowd was still big, but it seemed to us that it seemed to thin out more quickly than other similar crowds we had seen at other shops from the same company.

Last week, Buffalo Wildwings told analysts that same store sales were likely to disappoint, and the stock fell, as did the rest of the casual restaurant sector. Now, after the bell, on May 3rd, Texas Roadhouse told analysts that "April comparable restaurant sales fell slightly," and shares took a beating in the after-hours session.

Here is the issue. On 5-3, the market rallied on what it interpreted as good economic news, the consumer was back spending money. But a close look at the personal income figures shows that consumers spent their savings in April, and some analysts are saying that much of the spending boom in March and April may have been partially due to tax refunds, as well as employment benefits. If that's true, then Buffalo Wild Wings, Panera, Brinker, and Texas Roadhouse are confirming what we noticed over the weekend, empty tables at restaurants that were full just a month ago.

And if the restaurants are empty, that means that consumers aren't all that positive about things, which could mean that the rosy scenario painted by data from March and April, is just that, a rosy scenario that's already passed us by, leaving the data behind.

Ask yourself this question.  If business was so good, why would Brinker International be selling its second high profile brand, On the Border, after it jettisoned the majority ownership in Romano's Macaroni Grill in the past few months?

(Go to http://www.financialwire.net/2010/04/22/about-duarte/ for more about Mr. Duarte.)

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