We’ve talked on consumer restaurants and their recent resurgence, but we believe MAXS deserves a second look. To summarize, MAXS’s 1Q21 profits performance was higher than anticipated, which management ascribed to the company’s cost-cutting measures implemented in 2020. Revenues were still down 32 percent, but cost of goods sold (COGS) dropped even faster, by 39 percent, resulting in gross margins of 26.2 percent, which is already close to 2019 levels. However, even with the increase in the top line, the bottom line would have remained negative, if not for one-time items that have driven net income upward. On a quarter-over-quarter basis, 1Q21 sales were also somewhat lower than in the previous quarter, owing to seasonal holiday sales, but better margins helped to keep profit and income margin levels stable. Similarly to the other restaurants, MAXS is a reopening play, but headwinds in consumer spending, exacerbated by rising inflation and unemployment, as well as higher raw material prices. Although better margins have been seen in previous quarters, poor sales as a result of dine-in limitations (which are barely 60 percent of 2019 levels) would only serve to further postpone the company’s recovery in the coming months. Our prediction for the quickest comeback among the restaurants still remains PIZZA, but we think MAXS may not be far behind in terms of recovery. Despite the fact that our prognosis for MAXS has improved, we still prefer to enter at lower prices.


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