Restaurant Sales, Traffic Tumble: "The Industry Hasn't Reported A Positive Month Since February 2016"

Tyler Durden's picture

There appeared to be a glimmer of hope for the restaurant industry last month, when despite ongoing negative restaurant sales and traffic performance in April, BlackBox Intelligence Executive Director, Victor Fernandez said that "there are some reasons to be cautiously optimistic about the second quarter, at least in terms of improvement over what we’ve seen in the recent past" adding that "the move of the Easter holiday meant that April’s results were likely softer than they would have been without this shift, meaning spending in restaurants was probably a little stronger than the numbers show."

Alas, any trace of optimism was doused with the latest BlackBox snapshot report (based on weekly sales data from over 27,000 restaurant units, and 155 brands representing $67 billion dollars in annual revenue) which found that May was another disappointing month for chain restaurants by virtually all measures.

Same-store sales were down -1.1%, which represents a 0.1% decline from April. At the same time, same-store traffic "growth" also dropped by -3.0% in May, down 3.2% on a rolling 3 month basis. Although traffic results improved from prior month, the growth in check average was lower than it has been in recent months, causing the fall in sales growth vs. March and April.

More concerning is that the restaurant industry has not reported a month of positive sales since February of 2016, according to BlackBox.

The latest report from the National Restaurant Association found much of the same:as a result of softer sales and customer traffic levels and dampened optimism among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) registered a sizable decline in April. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.3 in April, down 1.5 percent from a level of 101.8 in March.

  • The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 99.1 in April – down 2.3% from a level of 101.4 in March. April represented the sixth time in the last seven months with a reading below 100, which signifies contraction in the current situation indicators.
  • The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 101.5 in April – down 0.7 percent from March. Although the Expectations Index remained above 100 – signaling the anticipation of generally positive business conditions in the months ahead – it declined to its lowest level in six months.

April’s sharp decline in the RPI was the result of broadbased drops in both the current situation and expectations indicators. And, as BlackBox found, the Natl Restaurant Association confirmed that restaurant operators reported a net decline in same-store sales and customer traffic, which followed modestly stronger results in March. In addition, restaurant operators’ six-month outlook for both sales growth and the economy retrenched from more positive readings in recent months.

Restaurant operators reported a net decline in same-store sales for the sixth time in the last seven months. Only 34% of restaurant operators reported a same-store sales increase between April 2016 and April 2017, down sharply from 57% of operators who reported higher same-store sales in March. 47% of operators said their sales declined in April, up from 30 percent who reported similarly in March.

Restaurant operators also reported softer customer traffic levels in April. Only 26% of restaurant operators reported an increase in customer traffic between April 2016 and April 2017, down from 41 percent of  operators who reported higher traffic in March. Fifty-two percent of operators reported a decline in customer traffic in April, up from 38% in March.

* * *

Discussing the latest results, Fernandez said that “at this point, we believe the most likely scenario for the current quarter will be an improvement over recent quarters, while still suffering negative sales given the current consumer spending trends." Or, as we would put it, no actual improvement.

Looking at the macro picture,  where there has recentlyy been an upturn in retail spending on most goods and services, adds to the confusion as it stands in stark contrast to the continued decline in sales growth at restaurants. Consumers appear to be maintaining their spending at restaurants - at a declining pace - but increasing it for other goods and services. This change in consumer spending patterns was identified about a year ago and how much longer it will continue is unclear.

Additionally, the restaurant operators’ outlook for the economy is not as bullish as it was in recent months. 22% of restaurant operators said they expect economic conditions to improve in six months, down 15% points from the reading in December 2016. 12% of operators expect economic conditions to worsen in six months, while about two-thirds think conditions in six months will be about the same as they are now.

The details:

  • May sales were weak across all segments. Only the fine dining segment was able to achieve very small positive same-store sales growth during the month. The second best performing segment during May was quick service. That soft performance notwithstanding, the best performing segments continue to be those with the lowest and highest average guest checks. “Dining experience on one end and value and convenience on the other seem to continue to be key components of restaurant sales performance based on current consumer spending trends,” said Fernandez.
  • The weakest performing segment in May was casual dining. This was a bit unexpected since the segment showed improved performance during the first four months of 2017 after lagging the industry for several years. Casual dining has added a modest number of new units, but same-store sales declines have contributed to its overall loss in market share.
  • Despite weak sales results year-to-date, fast casual continues to win the market share battle. It gained the most share in the first quarter of 2017 compared with the same quarter a year ago. Aggressive expansion has driven total sales growth, but increased competition and market build-out have undoubtedly impacted same-store sales for the segment. The only other segment that gained market share year-over-year was quick service.

There is a silver lining: while overall sales continue to decline for most of the industry, there are pockets of opportunity that some brands have capitalized on to boost performance. Dine-in sales have been negative year-to-date, but to-go is up 2.9 percent, perhaps facilitated by recent introductions of smartphone-based ordering. Sales are also up in catering, delivery and drive-thru. From a day part perspective, breakfast and mid-afternoon sales offer continued opportunities for growth, while lunch and, especially, dinner sales continue to stumble.

Ironically, in addition to challenges from falling guest counts and consumer spending, strong challenges continue to confront restaurants in both staffing and retaining enough qualified workers. We say ironically, because as we showed after the latest jobs report, restaurant/fast food/waiter/bartender hiring remains the only strong spot in the US labor market. As the chart below shows, starting in March of 2010 and continuing through April of 2017, there have been 87 consecutive month of payroll gains for America's waiters and bartenders, an unprecedented feat and an all time record for any job category. Putting this number in context, total job gains for the sector over the past 7 years have amounted to 2.378 million or just under 15% of the total 16.4 million in new jobs created by the US over the past 87 months

And yet, according to BlackBox, restaurant operators are pessimistic regarding the difficulty of recruiting in the upcoming quarters. Part of the problem is that hiring for new restaurant positions has started to pick up again. The number of employees in the chain restaurant sector increased by 1.9 percent during April compared with a year ago, up from 1.5 percent growth recorded in March. The other issue affecting staffing is rising turnover. Turnover rates for both hourly employees and management staff increased again during April. “The turnover numbers that we are reporting are stunning”, said Joni Thomas Doolin, CEO of TDn2K. “Many of the brands that we track are already facing unsustainable levels of staffing vacancies. Most alarming is the fact that over 70% of employees are leaving voluntarily as opportunities for better work increase”.

Meanwhile the overall labor market nearing full employment doesn’t hint at relief for operators any time soon. The consequences of turnover are well documented by TDn2K. Not only does it impact service levels and guest satisfaction, which correlate to traffic and sales, but it is also a huge source of additional costs hurting the bottom line. According to a recent study by People Report, it costs on average about $2,200 to replace a single restaurant hourly employee, while the cost of turnover for all levels of restaurant management is on average about $15,000 per manager.

“The companies who are leading in the marketplace are starting by winning in the workplace. Being a great employer has never been more important,” stressed Doolin.

The summary: after 14 months of continuous declines for the restaurant industry, the end of the tunnel is nowhere in sight.

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LieEnforcementOfficer's picture

The depression is upon us

I am Jobe's picture

How dare you speak the truth. Now go watch NETFLIX to keep yourself immersed in joy and forget about what is happening. 

Croesus's picture

Hey, everything's grand with the economy, sayeth the criminals.

Son of Loki's picture

Who can afford to eat anymore?

spiral galaxy's picture

Who can afford the 10 percent food tax and mandatory 18-20% tip?

El Oregonian's picture

I'll pay you Tuesday for a hamburger today.

brown_hornet's picture

If you would have inserted "gladly" I would have upvoted you.

Mr. Universe's picture

In SF you get the added bonus of a 4% "health mandate" or some other BS added to your bill as well.

open calender'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

edotabin's picture

:-)

The restaurant industry is based on 2 factors:

1. lack of time/convenience

2. entertainment

As things get tight it is only natural that this will suffer.

Maybe it's just as well since both factors contribute immensely to obesity. If you search the internet you will see that if you want to live a long healthy life, you'll have to reduce food intake.

 

yogibear's picture

The crap used to be cheap, now it's expensive.

Winston Churchill's picture

Has been since around Jan.1 of last year.

We never came out of the Christmas hangover period.

They just can't hide it anymore.

Batten down the hatches.

subversion's picture

Let it snow....let it snow.....let is snoooow.

max2205's picture

Casual dining has priced themselves in to cut omer revolt.  Tab for two no alcohol is over 40 without tip..... lots of choices but they're all too expensive.  

Juggernaut x2's picture

A family of 4 at a no-tip burger place like Five Goys is $40 now

yogibear's picture

Yep, unhealthy food is now high priced.

MaxMax's picture

There is an Italian restaurant I have been going to for over 10 years.  It used to be that a dinner for two - appetizer, main course and two drinks ran about $100.  Last week, same dinner was almost $200.

chunga's picture

The experts call that deflation.

yogibear's picture

Expect more of these places to close as people cannot afford to eat out anymore.

Nice going Yellen and her 12 minions. Keep inflating everything and impoverishing the 80%!

I am Jobe's picture

Folks in TX can afford to lose a few hundred pounds. Have you seen the size of women in TX in their 40's. Geez , I think they give meaning to Gravity. White, latina, Black all of them are over weight in TX and they talk about family BBQ and stuffing their faces with tacos and burittos. 

Herodotus's picture

Everything is bigger in Texas.

Son of Loki's picture

It's truly an epidemic. The young Latinos are super cute but somehow by the time they are 35 or so, they really get fat.

White and black women these days are overweight as soon as they are pooped out and hit the floor. Plus, white girls tend to be dumb, lazy and spoiled and black girls are dumb, lazy and feel 'entitled' in my very limited experience. Plus, the B&W gals carry more diseases according to the stats from CDC.

There's hope since those Asian gals are small and most stay slim, clean (and smart). That's why i have been dating them recently. One caveat: many Chinese gals are sort of spoiled these days too. Some ask how many houses/apartments do I own before they go out with me?!

Then, I move on to the next one......

I am Jobe's picture

TX women are gold diggers. Divorced and Fat by the time they are 40. Van suspensions are useless. 

peippe's picture

that's why ford built the king ranch F350.

& you thought it was for towing, lol.

well, kinda.

LieEnforcementOfficer's picture

Latinas tend to peak around 20 then its all down a very steep incline from there. For you to say 35 is INCREDIBLY generous.

Son of Loki's picture
Women Are at the Heart of America’s Obesity Epidemic


 

http://fortune.com/2016/06/08/obesity-epidemic-women-teens/

 

WARNING! Try not to look at the pictures in the article---you won't eat for a month!

rejected's picture

From the Article linked:

"The food and restaurant industries may be the sector of society with the greatest potential to affect the obesity epidemic in a reasonable time frame," they wrote. “These industries have been good at developing and successfully marketing unhealthy foods; perhaps it will be possible for them to develop and market healthy foods.” 

So, I'm waiting for Philadelphia to introduce a 'fat tax'.  We all know that the answer to all problems is to tax them.

Chart the use of Aspartame from 1981. Then overlay a fat chart for the same period. All these fake sweeteners are dangerous but Aspartame leads the others. Today, Many foods and drinks  have these sweeteners but are not required to inform you. Aspartame is addictive. I knew a person that went from drinking 1 can of zero calorie soda a day to 2-3 liter bottles. He gained weight rapidly as the Aspartame made him crave carbohydrates. Explaining this to him was useless. Check out the fat bodies at Wally world. Most will have cases of low calorie drinks containing Aspartame in their carts.

Of course everyone blames poor old sugar. That is a diversion. You want real conspiracy theory? Well chart the costs of medical care and drugs since 1981 especially Diabetes Type II.  Kind of like the computer antivirus companies creating the virus to increase sales.  An ageless old scam. At government level we call it False Flags.

political_proxy's picture

Rx creates drugs for sustanability of the vidtim, er cleint, um...patient. 

Rx and medicine in general are not looking for sures, no profit.

peippe's picture

one man's disgust is another man's 'plumper porn' lol.

you just never know.

Miffed Microbiologist's picture

My daughter spent a year in Shanghai a few years ago. She told me the women there had a saying " marry for money, love will come later." I was a bit shocked. She did say they were all trim and beautiful if that is any consolation.

Miffed

Government needs you to pay taxes's picture

You can never be too rich or too thin.

FoggyWorld's picture

Yeah, but look at who said that.  Rich and thin, yes.   Happy - not so much.

ModernMusket's picture

Considering the one child policy has created a staggering male to female ratio, the decent women can pretty much command what they want.

And I learned the hard way that Shanghai women don't do crap around the house.

edotabin's picture

Classic case of quantity over quality here. There's a multi-billion dollar diet industry and it exists simply because people don't understand 1 simple thing: Food is used for entertainment and as a reward mechanism to overcome stress.

Yes, there are secondary factors such as pathetically poor food quality etc. but it's not the main reason we are experiencing problems of this magnitude. If people were happier and more content they wouldn't stuff their faces as much. Add some exercise to that and "poof" the multi-billion dollar industry is reduced by 90% Will this happen? No. So there you go........... back on that huge wheel of BS that keeps everyone in a state of constant engagement while accomplishing nothing.

 

 

fattail's picture

Too many tortillas for the Latinos.  To many carbs for the rest.  

political_proxy's picture

Processed food kills people. 

SPQR 70AD's picture

americanized gooks are the worse. gook women are souless cold and heartless

Ban KKiller's picture

Visiting Nebraska we would play the game of see who finds the fattest. Just when you think you have seen the worst along comes a station wagon FULL of the obese. Whites I might add....

I am Jobe's picture

Corn Fed Midwest, . Drove thru Iowa , geez yikes. white Trash and obese. 

cheka's picture

tenn was the state that impressed me more than tx.  big white girls, lots of tats

Kidbuck's picture

Them big girls are prized in Texas. 45 years ago a Texan told me why: shade in the summer and heat in the winter.

Offthebeach's picture

They are just short for their weight.

Ban KKiller's picture

Let's see....go out to dinner. Poor service by blue haired, tattoed, lip pierced person of some sort of sex. Food of questionable quality. High prices and the tip (?). Servers rushing you out or barely waiting on you. Sounds like decline to me. 

Or pick our own vegeatable and eat the meat from our local hog and steer farmers? Oh, at about one quarter the cost, if not less. 

Fast, it may be. Food? Not really. Mostly carbs, salt and sugar. 

Corporate weed is for suckers. Just so you don't forget. 

chunga's picture

I used to buy bones for the dogs @ 10 cents a pound at the slaughter house where we get our beef. A while ago I learned the dog bone police came along and made him stop selling dog bones.

I asked the owner about it and he told me he figured somebody tried to eat them and then complained.

lil dirtball's picture

How does one go about making demi-glace without beef bones?

Taffy Lewis's picture

Ban KKiller, it's also a nice touch to let the Mexican dishwashers roam around the bar and dining area like they own the joint.

Usura's picture

Good news.  Let me know when the average weight has declined by 50 lbs.