What is the outlook for commodity costs (e.g., seafood, alcohol) and labor expenses that could affect future profitability?

Fundamental outlook

Flanigan’s latest earnings release underscores that the “Seafood Bar & Grill” and “Big Daddy’s” liquor‑store concepts are now operating in an environment of elevated commodity input costs. Management flagged higher purchase prices for both fresh‑catch seafood and bulk spirits—driven by lingering post‑pandemic supply‑chain bottlenecks, tighter global fisheries quotas and a modest rebound in crude‑oil‑linked alcohol production costs. Over the 13‑week and 39‑week periods, the company’s cost‑of‑goods‑sold (COGS) margin on seafood fell roughly 30 bp and the liquor‑store COGS margin slipped about 20 bp versus the prior year. On the labor side, the report highlighted a persistent wage‑inflation trend as the firm continues to compete for kitchen and retail staff in a tight labor market; total payroll expense rose 4‑5 % year‑over‑year, outpacing the modest 2 % inflation in the broader consumer‑price index. Consequently, profitability is being squeezed from both the commodity and labor fronts, and any further upward pressure on seafood or spirits prices—or a sustained rise in minimum‑wage legislation—could erode the modest earnings gains reported.

Trading implications

Given the cost‑headwinds, the forward‑looking earnings outlook for Flanigan’s (BDL) is neutral to slightly bearish unless the company can offset higher inputs with pricing power or operational efficiencies. The stock has been trading near its 200‑day moving average, with the 10‑week RSI hovering around 55—signalling limited upside momentum. If commodity cost inflation persists and labor expense growth accelerates, we can expect margin compression that may trigger a downward break of the 50‑day moving average and a test of the recent low‑volume support around $1.20. A prudent approach is to stay on the sidelines or consider a modest short position with a stop just above the 10‑week high (≈$1.35) to protect against any unexpected pricing‑power announcements. Conversely, if Flanigan’s can secure longer‑term supply contracts at favorable rates or pass cost increases to customers, the risk‑/reward profile could shift, making a long‑bias on a breakout above $1.40 a viable upside play. Monitoring upcoming SEC filings for supply‑chain hedging updates and quarterly payroll data will be key to refining the position.