Restaurant Sales And Traffic Tumble

Tyler Durden's picture

There appeared to be a glimmer of hope for the restaurant industry last month, when BlackBox Intelligence's TDn2K titled its most recent Restaurant Industry Snapshot: “Flat Sales, Welcome Change for Restaurant Industry in January.” In the report, it said that "while same-store sales growth was flat (zero percent) in January, it represented a welcome break from the ten consecutive months of negative sales growth experienced by the industry through the end of last year." That finding, however, was refuted by a recent Reuters/Ipsos opinion poll which found that one-third of the 4,200 adult respondents said they were eating in restaurants less often than three months ago. The poll was conducted in the second half of January. Of them, 62% cited cost as the primary reason.

The modest recovery was also denied by the most recent Restaurant Performance Index report by the National Restaurant Association, which lamented that “same-store sales and customer traffic levels remained soft” in January, which kept the Current Situation Index (tracking same-store sales, traffic, labor and capital expenditures) at 98.6 in January, the fourth consecutive month of contraction, and tied for the worst print in four years.

More concerning was the disclosure by restaurant operators, 50% of whom said same-store sales declined year-over-year, the second highest reading in recent history and second only to the 53% reported last August.

Quite unlike the rosy picture of consumer spending painted by various other macroeconomic data points such as consumer spending, or even alleged wage growth, looking at one of America's favorite pastimes - eating out - the situation has rarly been more gloomy.

While the silver lining to the latest RPI report was a surge of hope in the near-term futures as a result of the "animal spirits" unleashed by Trump, which have impacted everything from the stock market to the jobs report (recall the January-February plunge in people out of the labor force was the biggest on record), the latest, just released report by TDn2Kquickly doused those hopes in its latest, February, Restaurant Industry Snapshot which found that "Restaurant Sales and Traffic Tumble in February."

Same-store sales fell -3.7 percent in February, with traffic declining -5.0 percent. Unfortunately, January’s improved results were not a turning point in declining industry performance. Trends are hard to discern since weather, holiday shifts in Valentine’s Day and President’s Day and winter breaks distorted weekly results.

A macro view leaves little room for optimism. Same-store sales averaged -2.7 percent for the last three months. February’s results were among the weakest in the last four years.

Restaurant Sales and Traffic Tumble in February

Same-store sales fell -3.7 percent in February, with traffic declining -5.0 percent. Unfortunately, January’s improved results were not a turning point in declining industry performance.

A macro view leaves little room for optimism. Same-store sales averaged -2.7 percent for the last three months. February’s results were among the weakest in the last four years. This insight comes from data by TDn2K through The Restaurant Industry Snapshot, based on weekly sales from over 26,000+ restaurant units and 145+ brands, representing $66 billion dollars in annual revenue.

Guest Checks Plummet

Guest checks grew by a modest 1.2 percent in February, the lowest rate in four years. By contrast, checks had grown roughly 2.3 percent in the previous six months. This is a function of more conservative pricing, customer trade downs or discount promotions. All segments experienced a decline in the rate of check growth last month. Casual dining and quick service were virtually flat compared with the prior year. The bar and grill sub-segment actually experienced a drop in average checks versus 2016.

The Macroeconomic Environment

“While the stock market soars and confidence jumps, the economy continues on its steady but unspectacular upward path,” reported Joel Naroff, President of Naroff Economic Advisors and TDn2K economist. “Growth in the first quarter should exceed the tepid pace at the end of last year and with Europe finally starting to recover, the economy should pick up steam as we move through the year.”

Consumers are spending, but they are being battered by rising inflation. The rebound in energy costs may be helping that sector but it is not doing much for households. Indeed, spending power has flatlined as wage gains are barely offsetting price increases. That is putting additional pressure on the restaurant industry.

Still, the labor market is as tight as it has been in decades. Rising wages should lead to better spending in the months ahead. One note of caution: “The higher inflation has given the green light to the Fed to raise rates and if Trump spending and tax policies are implemented, rates are likely to rise faster than most currently expect.”

Income Tax Refund Delay

The IRS delayed roughly 40 million tax refunds associated with families claiming the “Earned Income Tax Credit” or the “Additional Child Tax Credit” this year. These delays undoubtedly depressed sales in the early weeks of February. In 2014, almost 30 million families received more than $70 billion in Earned Income Tax credits. Even a small delay in refunds had the potential to greatly impact consumer spending. Looking forward, the release of refunds provides some upside for the industry in the coming weeks. Curiously, none of this alleged weakness was observed in the recent retail sales data, which quite the contrary came in stronger than expected.

Upcoming: The Easter Effect

Easter is in April this year instead of March. The potential impact varies by segment. Brands where diners tend to celebrate special family occasions, such as upscale casual and fine dining, typically see an increase in sales during these periods. For these segments, same-store sales growth will likely be hurt in March but aided in April. For the dining segments where the holiday shift is less likely to impact consumer behavior, the sales impact will be less pronounced.

The Restaurant Workforce

According to the Q1 2017 Workforce Index published by TDn2K’s People Report restaurant operators predict staffing challenges to continue in 2017. However they are increasing at a slightly slower pace. One factor in this relative easing of labor woes is the slowdown in restaurant job growth reported in recent months. At the hourly employee level, 48 percent of restaurant companies reported that they planned to add staff during the first quarter, compared with 66 percent in the fourth quarter of 2016, hardly a glowing endorsement of the bright future for the sector.

Meanwhile, as job growth is slowing, but both hourly and management turnover continue to rise. As a consequence, recruiting and retaining qualified employees is the top people-related challenge for restaurant operators.

* * *

Finally as discussed last month, while a sense of renewed gloom has fallen over the restaurant space, one wouldn’t know this by walking around San Francisco. Yelp lists nearly 8,000 eating establishments in the City, many of them recent creations, including 500 cafés and 3,000 delis. A lot of the places are packed. Some can be impossible to get into on a Friday or Saturday night without a reservation days or weeks in advance. Others are nearly impossible to get into no matter when or what.

But, as Wolf Richter pointed out, other restaurants are nearly empty. There has been a slew of recent restaurant closures, amid talk of a big shakeout, including something called the “Mid-Market Massacre” in an area around Market St., where restaurant after restaurant closes, done in by exorbitant rents, not enough traffic, too much competition, a finicky public that might have lost interest, and insufficient sales. So yes, it’s tough out there, even in San Francisco, in what must be one of the toughest businesses on earth.

Yet while San Francisco - one of the few prosperous US hubs, generously funded with startup VC funding - is still holding on, the restaurant industry across the rest of the US continues to sink as consumer demand declines with every passing month, denying even the most rudimentary "recovery" narratives.

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GUS100CORRINA's picture

Retail is down across the board ... Message SPOCK?

America is broke and in debt up to her eyeballs!

IRS TAX Receits are in the toilet.

CPL's picture

Mom and pop greasy spoons/truck stops are doing okay.  It's the franchises that aren't doing well.

disclosure:  long mom and pop diners.

1980XLS's picture

Family does not demand $15 per hour unsustainable Min wage.

FireBrander's picture

The "Mom and Pop" original owners around here are dying off...thier kids are taking over the business...the kids like the money, but don't like the work.

Local Italian joint, I think it opened in the 60's...the best...well not anymore...what was once fresh made Italain sausage is NOW A FROZEN FUCKING PATTY that I suspect is microwaved until hot and then stuffed in a Sams club hoagie bun instead of the fresh baked Italian bread of years ago...fucking shoe leather. Took one bite, asked for my money back, will never be back.

Cognitive Dissonance's picture

Hold the pickles, hold the lettuce. Hell, hold the whole damn toxic meal.

It will amaze most people how much money they wasted once they no longer have money to spend....er...um....charge.

Logan 5's picture

Bernie Sanders will be along in 5...4...3...2... to fix this

CheapBastard's picture

Where's the beef?

 

My neighbor runs a retail store an dhas about 30 employees. Syas most hires are >50 because young kids do not want to start at the bottom and work themselves up. Moreover, they shit about retail and the products, yet expect to be hired in a management positon. He said many if not most yutes are out of touch with reality mostly due to parental failures and these school policies that demand teachers claim, "every student is a winner." Most are not winners. In fact, they come closer to failures with that kind of attitude he said.

 

prime american's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

canisdirus's picture

Working as a prostitute on backpage is not truly working on the internet. While you may find your clients through the internet, you're still making money the old fashioned way.

Peanut Butter Engineer's picture

Not just then $15 wage but also 20% gratitude even if the serve is their job. They ask us low and non-tippers to stay out of eat in that require tips plus $15 wage, thus we took their advice and will make do by cooking our own creation with YouTube chef for guidance.

CPL's picture

Yeah, but they also know how the roof over their head got there and the work it takes to put food on a plate.  It's not magic, it's work and planning.  It's why the lebanese and the chinese are so successful with their key investment clubs.  They pool family savings.  Get one spot opened and running with family, get it paid off, draw straws.  Person that draws the straw builds the next business, fill it with family.  Rinse and repeat.

Its how family businesses get built in 99.99% of the cases.  As one person pointed out though, the younger generation for a lot of these mom/pop places don't understand that it's the reason they have their options in life.  It's because ancestors tightened their belts and planed to make it work to get them them to the point they are today.

FireBrander's picture

In a moment of insanity, I ordered online, a well known brand "corporate pizza" for carry out; total crap...giant pile of sugar and salt.

They emailed me a survey about my purchase...told them the pizza was shit...they said sorry and gave me a code for another one for free.

Yeah, thanks, nothing like free shit....

espirit's picture

Think I'll pass on a free incurable disease along with a highly overpriced meal out.

Do you really think sick preparers stay home when ill?

Think of their chilluns starving... 

 

daveO's picture

Pizza Hut started destroying their brand over ten years ago when they began cheapening their ingredients. It was noticeable and I mentioned it to the staff. They said the company was using "healthier" ingredients. That store's been closed for over a decade now, replaced by mom & pop Japanese.

CPL's picture

If someone tells you it's 'free' it ain't.  Around my place delivery options aren't a thing in the country.  Food delivery here is I phone a guy for half a cow or hog to the butcher and it's delivered in a semi-truck or you drop off a deer and the butcher delivers it for ten bucks on the way home after work.  :-\

Truther's picture

Proof, this is a shitty economy. Fuck the lying Fed along with war-street shit heads.

yogibear's picture

They can keep snowing Wall Street and the fund managers.

ersatz007's picture

Right? I thought there was no inflation and that's why we have to keep the interest rates low and shit.

doctor10's picture

there is NO room for Obamacare 2.0 and the rest of the economy

max2205's picture

If $cat is the example then stawk prices should soar!

DeathMerchant's picture

The federal government collected a record of approximately $611,318,000,000 in individual income tax revenues through the first five months of fiscal 2017 (Oct. 1, 2016 through the end of February), according to the Monthly Treasury Statement released today.

A. Boaty's picture

Tax receipts down? That looks like a cause for celebration! Let's eat out!

buckstopshere's picture

Starbucks' stance on hiring refugees had an impact.

Belrev's picture

Starbucks refugee policy is now backfiring. People go into stores and sing US national anthem to protest.

https://www.youtube.com/watch?v=b-ePhbh0OQY

Arnold's picture

You've eaten at Starbucks?
More loose change than Brains.

Stan522's picture

Could it be due to the increase in minimum wages across the fruited plain that ultimately caused restaurants to increase their prices?

krispkritter's picture

 '...fruited plain...' Are you referring to San Fran's $15 mandate?

Stan522's picture

These states had minimum wage increases that hit January 2017: Alaska, Arizona Arkansas, California, Colorado, Connecticut, Florida, Hawaii, Maine, Massachusetts, Michigan, Missouri, New York, Ohio, South Dakota, Vermont, and Washington State. Within these and other states, there were cities that had minimum wage increases. Most of the cities were large metropolitan areas with lots of food establishments. Perhaps not every state, but a large enough portion to perhaps affect restaurant traffic.

FireBrander's picture

I live in one of those states and this issue is overblown.

While our city council was debating whether or not to raise the minimun to $9hr over the next TWO YEARS, EVERY burger joint in town was advertising $9hr to start today!

Local grocery chain is advertising $13hr for late night shelf stockers!

States that forced a raise from sub $10 to $15, yeah that would be disruptive, but more states/cities just raised the minimun to what (or less than what) the market was ALREADY paying.

Stan522's picture

I believe the greater challenge we face with government led minimum wage laws resides in the fact that those who are proponents of these tactics completely mis-characterize the free market and wages.

Minimum wage jobs are designed for the unskilled, uneducated and the never before job holder to enter the job market. My first job was a minimum wage job and after getting the skill sets and proving of the value I can bring, I received raises and promotions. It is NOT designed to be a career. The proponents of min-wage are always talking about a living wage. This misguided thinking has now made many min-wage workers indignant and now dependent upon those proponents.

This way of thinking primarily resides in Liberal's/Prog's.... Go figure......

FireBrander's picture

"Minimum wage jobs are designed for the unskilled, uneducated and the never before job holder to enter the job market"

That was true 20+ years ago, but it's not true today; "minimum wage jobs" are the new "Blue Collar" jobs.

To me, the "minimum wage" should be the line we draw between a "job" and "exploitation"; what that number is, we have to debate...it's more than $1 and less than $15 I'm sure.

I don't want to live in a society where 1 Billionaire employs 10,000 people at $1hr; that's just paid slavery. Billions in the hands of a few is a proven bad idea (soros)...

skunzie's picture

I live in one of those states with mandated pay increases.  When I do eat out I don't tip at all but write on the receipt, enjoy your minimum wage increase.  I haven't gotten a raise.  

Seasmoke's picture

I don't eat out much. But I did the Valentine's thing and had another eat out with the family in the last month and I was shocked we walked right in both times, no waiting , not even for one minute. .......my eyes, say it's all ready to collapse, just needs that final push from Mr. Yellen. 

espirit's picture

Just don't order tomato on your hamburger plate.

daveO's picture

The inflation is in Obamacare premiums. No money left over to go out. "Slavery, it's what's for dinner."

Bricker's picture

exactly.

poor people eat at mcdonalds and the workers prefer a sit down meal. Food stamps and welfare from gubinet

Time for another tax revolution?

FireBrander's picture

Applebees has half price appetizers from 9pm till Midnight...10PM on a friday night, right off a major interstate highway..we walk in, the place is empty...there were litterally more employees than customers. At half price, it wasn't a bad deal; food was actually pretty good..Wonton chicken tacos are A+.

FireBrander's picture

Oh, and while Applebees was empty, McDonalds had a line of cars in the drivethrough...and you have to drive by the Applebees to get to the McDonalds...

SixIsNinE's picture

everyone already has a DUI - why go to applebees?

oh, the mcdonalds eaters probably also paid the $40 for the double-dose flu shots Safeway offers - thought they would save some frns, ha! @ McDs

oh, by the way - my cousins in town who had a boy 1.5 years ago - who i of course tried to warn about vaccines - just heard a couple days ago someone is telling them the boy might be autistic.

____
drove down the I-25 corridor from Ft Collins to Denver yesterday - the growth is nonstop now. this is going to be one giant metroplex. i'm guessing they are trying to double Colorado's population within 20 years.
___

ate at a mexican place on the art gallery central, had a 3 piece mexican music group playing the classics, you know, "la bamba", etc. - anyway, hadn't seen this acquaintance, 50-ish, father of one, since 1.5 years ago - I had told him about ZeroHedge - he had totally forgot about zh - i asked him if he allows his daughter to use facebook - he says she now, 15, isn't interested - but he admits to being fakebook addicted - and what else - his top two other sights are FARK and BoingBoing.

!!!
now the kicker -- i ask if they have been following the vault 7 wiki leak - no. but they accuse Trump of being a nazi. seriously. "brown shirt" 1930s nazi.
typical white shitlery supporters.

the brainwashing is hardcore out there.

Peanut Butter Engineer's picture

You forgot the hidden gratitude charge that's not advertised.

The Ram's picture

I had the same experience.  Tried to find an open Thai restaurant on a Sunday (pre-Valentines day) here in S. FL, but could not.  After three Thai restuarants, had to settle on a Mom and Pop, 'independent' restaurant.   Very few customers, and very poor service, plus crappy food.  I refused to pay for my entre.  I did tip as the waiter seemed like he needed a break.  If there is a booming economy, I don't see it here in S. FL.  Also, I work in IT, a sector that generally does OK in good times and bad.  I have not witnessed wage increases for the last 5 years.  Wage increases on the sub $25/hr salary, in my opinion, do not count as someone on that level has little chance of living a true middle class lifestyle, at least here in the US.  Folks, the real economy is slowly being choked off.  It may sputter for a while despite the stock market hype.

IridiumRebel's picture

I pick up in 2 restaurants, partly for my veggie oil car and the other for extra cash, but it's been B A D.

flaminratzazz's picture

Here comes the crash..

flaminratzazz's picture

same thing happened in 07-08.. real estate flippers, rent inflation, consumer tightening,

crash..

bobert727's picture

Probably due to the weather being bad. Wait, it was good. Well some places good some places bad. Probably weather realted anyway.

 

Or Transitory......

BigFatUglyBubble's picture

Going out to eat sucks!  Pasta dish I can make better and for under $2 at home costs like $14 at Cheesecake UnsatisFactory.  Things ain't like they used to be.

I Write Code's picture

Y'know, funny thing about that.  I go to one or another branch of the Cheesecake Factory pretty often, I bought stock in the place when it was cheap and have to watch my investment, doncha know.  And you can get a good meal there for a reasonable price as things go - thought it's also twice the price of ten years ago, you do the math.

Recently I've noticed that in at least three different locations the black clientelle is certainly overrepresented, especially since none of these branches is anywhere near anything like a black neighborhood.  CAKE seems to have become a thang for those of the darker persuasion with a few dollars to spend.  Nothing wrong with that, as a stockholder or a fellow customer, it's middle class and better clientelle as far as appearances go, but just saying.

Smegley Wanxalot's picture

Shitty service, very high prices, dirty fake surroundings, and crappy food prepared by filthy illegals and/or people with poor hygiene.

Yeah, big surprise that people are tired of the restaurant experience. 

Haven't bought restaurant food in the USA in over 2 years.  Don't plan to do so ever again.

flaminratzazz's picture

How about a side of hepatitis with those chicken feathers?