US Restaurant Spending "Pretty Ugly" In February

Tyler Durden's picture

February marks the first three-months of consecutive declines in restaurant sales in almost three years as Bloomberg reports consumers caught in "an emotional moment" spooked by higher payroll taxes, surging healthcare premia, and spiking energy costs. "February was pretty ugly" for many chains after January delivered an initial blow."

Malcolm Knapp notes that "it's important to keep in mind that companies also are facing unusually tough comparable sales because of favorable weather in 2012," so the result is an industry that’s been "a lot softer so far this year."

It will hardly be a surprise to ZH readers but it appears that gas prices are key as Knapp notes, "that one-week spike was a killer; it destroyed sales in the first week of February," and has overall put "meaningful pressure on the discretionary purchasing power," of restaurants' (like Darden) customers.

"People are acting fearfully, or you could almost say rationally in a way,” because it’s not surprising they change their dining habits when they feel less confident as once again it's the middle class that appears under pressure. Casual dining is "definitely being squeezed" because "it's not food on-the-go and it's not high-end food for people trying to treat themselves."



Via Bloomberg,

Restaurants are reeling from their worst three months since 2010, as American diners spooked by higher payroll taxes cut back on eating out.


Sales at casual-dining establishments fell 5.4 percent last month, after declining 0.6 percent in January and 1.6 percent in December, according to the Knapp-Track Index of monthly restaurant sales. This was the first three months of consecutive declines in almost three years, with consumers caught in a “very emotional moment,” said Malcolm Knapp, a New York-based consultant who created the index and has monitored the industry since 1970.


“February was pretty ugly” for many chains -- and probably will be the worst month of the year -- after January delivered an “initial blow” while Americans grappled with increased payroll taxes and health-care premiums, rising gasoline prices and budget debates in Washington, Knapp said. “It’s important to keep in mind that companies also are facing unusually tough comparable sales because of favorable weather in 2012,” so the result is an industry that’s been “a lot softer so far this year.”




U.S. paychecks have shrunk this year after Congress and President Barack Obama let the tax that funds Social Security benefits revert to 6.2 percent from 4.2 percent. Meanwhile, the average price of a gallon of regular unleaded has risen about 12 percent since Dec. 31, to $3.69, including a one-week jump of 17 cents between Jan. 27 and Feb. 3, based on data from Heathrow, Florida-based AAA, the largest U.S. motoring organization.


“That one-week spike was a killer; it destroyed sales in the first week of February,” Knapp said.


All this has “put meaningful pressure on the discretionary purchasing power” of Darden’s customers, causing the company to pre-announce a decline in same-restaurant sales...




Consumers and industry contacts in surveys conducted this month by RBC Capital Markets said higher payroll taxes have been the biggest impediment to sales this year, hurting business for about 63 percent of companies, up from 36 percent last month. Meanwhile, 54 percent of Americans said they already cut back on dining out or intend to do so, the No. 1 reduced expense, followed by clothing and vacations.


People are acting fearfully, or you could almost say rationally in a way,” because it’s not surprising they change their dining habits when they feel less confident, said Larry Miller, an analyst in Atlanta with RBC. The difference of five guests a day could move a restaurant’s traffic counts by 1 percentage point because the business is “very sensitive to marginal changes.”




Casual dining is “definitely being squeezed” because “it’s not food on-the-go and it’s not high-end food for people trying to treat themselves,” said Matthew Beesley...


“It seems to me Darden is caught between those two buckets of expenditures,” Beesley said. A sit-down meal away from home is “extremely discretionary,” while there’s also an excess of supply.




Although casual-dining sales took the biggest hit in February -- down 4.9 percent -- the weakness was broader, according to “channel checks” conducted by RBC. ...


The environment still is “very, very tough” for Yum! Brands, operator of Taco Bell and KFC, said Chief Executive Officer David Novak. The Louisville, Kentucky-based company is bracing for “a tentative consumer, a tentative economy,” which probably will lead to a difficult year, ...




In addition, Americans aren’t cutting back equally on where they eat out. Sales have varied based on the type of food offered, with steakhouses showing more strength, Miller and Knapp agreed.



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Cdad's picture

Dog...don't be steppin' on my overpriced burrito with your Chinese noodles already.  I can eat Ramen at 10 pennies a pack...get for reals.  Just 'cause Sacrilege can't figure out the Hong Kong filter is no reason to be goin' all water army on me now, dog!

Folks who be goin' out to dinner at some sad ass corporate restaurant several times per week...are "financially challenged."  In fact, they would be what a gal I once knew called, "Nature be weedin' out the stupid."   Don't be goin' all tirade on me now...she said it...not me.

Honestly, if you can't figure out that you can make a burrito in your kitchen for pennies on the corporate dollar, standin' in line like some tool...well....I can't help you.

And 'bout burritos....if you can't figure out how a carb bomb like that is not "health food" are worse than stupid.  You gots some nuclear sort of dust on you...and you can't be saved.  I'm sorry...but that is how the world works.  Those of us who are terminal...well....terminal speaks for itself.

And if you do all that while standing in a room that makes a warehouse seem cozy...I'm not sure I actually have the best word that describes you.  I suspect the word is pretty bad, and not really suited for mixed company.

And the long run....somewhere between now and when our chance for survival drops to zero....let's just say that burrito chompin' fools standing in warehouse like rooms don't stand a chance.  Guys like me...well...we'll be swapin' packs of Marlboro in exchange for your ammunition.  

object_orient's picture

Burritos are still a good deal at mom and pop takeout places. Maybe they are carb bombs, but I thought preppers loved rice and beans.

Cdad's picture

That is correct...but the problem of course and me ain't scrappin' in a field somewhere tryin' to figure out which one of us is going to make it right now.  And rice and beans, of course, for those who actually know how to boil water....pennies.  Freakin' fake copper Fed issued pennies, dog.

My guess...after all the shit goes that I can prepare a fresh hot burrito for you, and you'll hand over your last round to me, dog.  That's what I be sayin'.....................

As for you folks congregatin' in warehouses....good luck to you.  My guess is you are fully long the S&P right here....'cause you heard about the "recovery" goin' on.


WayBehind's picture

Unless you are a fast food February was a good month for restaurants because of the Valentine's Day .... In general, high end and cheap restaurants are doing good. The middle range (or should I say middle class) no so much.

El Oregonian's picture

50LB Rice $25.50, 50LB Beans 18.00, flour, salt, shortening, baking soda (tortillas) 5LB block cheddar on sale and some cheap cuts of meat= Good-cheap burritos for a month for under 120.00

TruthInSunshine's picture

This is the time to be smart, frugal and healthier, all at the same time.

This is true of food & beverage selection as it is of all things.

Did any of you ever truly look around at the quality and quantity of the types pf products and services the average person spends their units of labor/savings/wealth on, or worse yet, goes into debt to obtain? Much, and arguably most, of the products are absolute crap, that will do nothing to enhance any quality of their life, but will exist in a dust collecting state, as an empirical piece of evidence of the success of marketing and the phenomenon of the "always on consumption switch" (the default position).

In fact, this example of "empty" and even "destructive" calories (destruction of the diabetes, arterial diseases, metabolic syndrome and cancer forms) is the perfect example of the U.S. economy as a whole, which now more than ever has a higher proportion of its output that can be properly categorized as "junk food."

The American Economy has been and is now saddled with such a disproportionately large accumulation of completely discretionary products, goods and services, upon which the economy is now massively dependent (more than any other in the world-- more than any European nation, Japan or even the U.K.), that as the debt-saturated consumers ultimately break rather than merely bend, anyone dependent on such things as restaurant sales for their livelihood will look back at sales declines like we're seeing now and marvel at how it lasted this long.

This is just one of many reasons it's impossible to get government to stop the relentless printing. As soon as the government stops (that will be forced by extraneous circumstances most likely, and not by choice, so long as it has the choice) attempting to patch the increasingly larger holes being created by the deleveraging (in real and EVEN nominal terms) of the American Debt Serf, the extent of the Great Hollowing out of the American Economy, which is a process still underway, will be as plainly visible to the average sheeple as it is and has been to many of you.

This is the real reason the Big Box Marts, the Happy TGI-McFunsters, the FedExs, and so many retailers are turning into ghost towns across much of the country, and the cutting down of the discretionary fat that comprises such a disproportionately massive % of the American Junk Food Economy is only 4 years into this process, and there's nothing that the Federal Reserve or government can do to stem this; the more they print, the more it becomes obvious just how little demand there really is for such a wide basket of the goods and services America's present day economy is producing.

40 years of credit/debt binging has brought about the Great Diabetic American Economy, 2008 was merely another (if powerful) sign of the extensive damage that has been wrought by the underlying disease, and the more destructive, extensive cardiovascular & pulmonary events still haven't even occurred -- but they will.

Steaming_Wookie_Doo's picture

Indeed! I'm a bit of a foodie. I'm always surprised when I tell people how easy it is to cook (even that delicious lengua for the the burritos), they then complain they don't have time. Worse yet, they go to trash like Taco Bell, which is definitely no longer cheap eats. Local mexican/salvadoran food trucks dish out stuff (cheap) that's infinitely better than corporate crap4food.

Also check out restaurant supply type places where you can get even better prices. Rice and beans (if kept dry) will not go bad. No reason not to buy big on some items.

Cast Iron Skillet's picture

You can put onions in 'em, too - they're cheap, taste good, and keep for a while.

BKbroiler's picture

take your drunk ass home.

centerline's picture

Have a drink.  Order up some good food.  The supply chain has never been so good and won't be again for a very long time.

object_orient's picture

Boiling water takes energy. In your SHTF scenario gas, electricity, firewood will be worth considerably more than pennies. But whatever. I eat BRCs a few times a week, and not at Chipotle (or in a warehouse???)

Larry Dallas's picture

Down arrowed because you purposely try to sound more ignorant than you probably are...


Almost Solvent's picture

The majority of "restaurants" serve brought in or frozen shit. 


The majority of those that don't are "expensive" for many.


Endless Shrimp, where are you???

LetThemEatRand's picture

The endless shrimp was all eaten by the endless anal leakage fish.  YUM.

TruthInSunshine's picture

Where "Endless Shrimp" & Most of the "Better" Seafood in Most Restaurants & Grocery Stores Comes From & How It's Raised & Processed: Bon Appetit, Bitchez

Workers at Ngoc Sinh Seafoods Trading & Processing Export Enterprise in Vietnam were recently seen hauling plastic baskets of shrimp through the company's filthy, trash-ridden, and bug-infested facility. Containers full of the shrimp were loaded up with ice made from questionable, and often contaminated, tap water that the government recommends boiling before use, which has become the norm rather than the exception when it comes to seafood processing.


Many seafood farms feed fish animal waste

Similar unsanitary conditions are common throughout China as well, which is a major exporter of tilapia and scallops. According to Bloomberg, many seafood farmers in China actually feed their fish feces from pigs, geese, and other cattle, even though the practice is extremely unsafe. Not only does this exposure to animal waste tend to make the fish sick, but it also contaminates their water environments with excrement, which is often polluted with harmful bacteria like salmonella.


"Those conditions -- ice made from dirty water, animals near the farms, pigs -- are unacceptable," said Mansour Samadpour, a microbiologist, to Bloomberg Markets magazine about the dirty secrets of the seafood trade. Samadpour's company, IEH Laboratories & Consulting Group, specializes in testing the cleanliness of water for the shellfish farming industry.


Unscrupulous seafood farmers, particularly in Asian countries, are cutting corners to boost profits, which puts consumers at high risk. In China, many operators have altogether stopped purchasing safer commercial feed, and have instead turned to exclusively feeding their fish potentially deadly animal waste.


"The manure the Chinese use to feed fish is frequently contaminated with microbes and salmonella," says Michael Doyle, Director of the University of Georgia's Center for Food Safety, about the larger problem of China's seafood farming industry.

El Oregonian's picture

They got sucked up by the BP oil skimmers.

Dugald's picture

I know this is OT but its good for a chuckle or six.....


Tolerance - >From a British Perspective .... Simply Brilliant!!!!
> From a British perspective: This was a reader's 'letter to the editor
> ' published in daily " SUN" on Sunday.
> Tolerance .. I am truly perplexed that so many of my friends are
> against another mosque being built in London on the Thames?
> I think it should be the goal of every Englishman to be tolerant. Thus
> the Mosque should be allowed, in an effort to promote tolerance.
> That is why I also propose that two nightclubs be opened next door to
> the mosque, thereby promoting tolerance from within the mosque.
> We could call one of the clubs, which would be gay, "The Turban
> Cowboy", and the other a topless bar called "You Mecca Me Hot."
> Next door should be a butcher shop that specializes in pork, and
> adjacent to that an open-pit barbeque pork restaurant, called "Iraq o'
> Ribs."
> Across the street there could be a lingerie store called "Victoria
> Keeps Nothing Secret ", with sexy mannequins in the window modeling
> the goods.
> Next door to the lingerie shop there would be room for an adult sex
> toy shop, "Koranal Knowledge ", its name in flashing neon lights, and
> on the other side a liquor store called "Morehammered."
> All of this would encourage the Muslims to demonstrate the tolerance
> they demand of us, so the mosque problem would be solved.
> If you agree with promoting tolerance and you think this is a good
> plan, please publish my letter.

Kitler's picture

Out of the frying pan and into the fire.

(Time to short restaurants & insurance companies)

Carl Spackler's picture

Darden announces on Friday.

Hmmmm...should I load up on the out-of-the-money puts at a $40 strike?


meatball's picture

If a small increase in gas price affects your budget that much, you shouldn't be eating out in the first place.

W74's picture

Probably half of America lives paycheck-to-paycheck, saves nothing, and is completely puzzled about why they're broke every month.  It doesn't matter if these people make 40K/year or over 100K, you'd be surprized at how many people have no idea where/how they spend.

otto skorzeny's picture

whenever you see those shows on tv where financial advisors try to curtail out of control spending by some idiot-going out to eat/drink eats up a monster part of their budget.

Van Halen's picture

Otto, you hit the nail on the head - I see people at my work and students at my school coming in almost every single day with a great big coffee or purchased bottled something. That's got to kick them in the the pants financially after let's say conservatively 48 weeks of 5 days buying extras to eat/drink. And that's only one year.

duo's picture

Last month I saw a couple spend $34 for lunch at a Vietnamese Pho place.  They ordered pretty much everything on the menu.

Last Saturday at lunch I watched a mom and her kids go through $24 for coffee and brownies for her and her 3 kids.  You do that every day and it adds up (like two car payments or half a mortgage).  WTF?

Pope Clement's picture

Good advice TIS - Disturbing research showing that not only wheat is derimental to your health and the health of your gut but the complex carbs of all grains are a primary source of many modern ailments...

S5936's picture

At the sev ( 7/11) typical youngster order goes like this , " get me a pack of Newports, a double giant Grape big gulp, a couple of those 2 for 1 big bite hot dogs and a couple of them loser for life scratch offs. $ 20 bucks & the day has just begun, it's 7 am ! .....& just so you know I was getting a green tea. That is all.

Chaos_Theory's picture

Better to spend it now than park it in a savings account waiting for our own Cypriot haircut.


Edit:  however, better to spend on things of value in a potential barter society, vice iShit.

ebworthen's picture


If you notice the number of commercials from bling eateries (Applebee's, Chilli's, and the like) you can see they are trying desperately to woo customers back.

I would guess that Olive Garden's returns are going to be worse and worse as this year proceeds as well.

otto skorzeny's picture

OG is going to get a makeover-that will bring em flooding back in.

ebworthen's picture

I'm done with the Olive Garden.

Last time I went they didn't bring spoons. 

When I asked for spoons the waiter said "May I ask what for?".

otto skorzeny's picture

you should have told him you needed to cook your h

Son of Loki's picture

I asked for a tiny bit more of the red sauce and it was like asking for all the cash out of their safe...the Olive Garden waitresses are rude and when we reported it to the manager he shrugged his shoulders. That's the last time I take my office folks to eat there.


Service gets worse and worse and seems to be spreading like an infection. Before you know it, they'll stop delivering mail on Saturdays!

Janice's picture

I spent some time thinking about this when I was recently treated rudely by a service person, and I have come to an epiphany. Service people are the same people who are so uneducated, unskilled and inept that they could not get government jobs. Let that sink in for a little while. I figure the nice ones are the same people who attend night school to get ahead.

S5936's picture

It's the horseshit simpleton music they play ALL F'in day. It will drive anyone to the edge. Not to mention the mental patient customers.

Mrmojorisin515's picture

have you ever worked in the service industry?

Almost Solvent's picture

But they keep the "endless" gluten and salt.


Where are "endless" shrimp when you need them?


Maybe Golden Corral will satisfy the "endless" urge?

Key-Rick's picture

olive garden - we heat up the frozen dog shit for you.  

Supernova Born's picture

Their chefs are trained in Tuscany, hater.

kliguy38's picture

Bloomy may relent and bring back 32oz vino...........yumyum

natty light's picture

You can still get a 40 in NY. 

TruthInSunshine's picture

Apple Wine (aka Night Train, Mad Dog 20/20).

Gives me the DTs just thinking about my college days.

miker's picture

Most of the economy is slowing up in a major way.  More to come with seakwestrashun.  The more they talk up the stock market, the worse it acutally negative correlation tool.


pods's picture

Look on the bright side, think of how many horses will be saved?


Mark123's picture

I'm whispering to my burger.

Bunga Bunga's picture

The term 'trojan horse' gets a new meaning in a restaurant.

keep the bastards honest's picture

I had to get an  new password and had to fight my way in to reply. I cant stop stop laughing at this. 

jeez I am surrounded by fkn dullards. Dont know if its the food or the media. Thanx bunga made my night after exposure to fkwits all day long.