Industry News | October 12, 2013

Q3 Restaurant Industry Sales Mirror Economic Uncertainty

Despite the improvement during September, restaurant same-store sales for the third quarter again fell into negative territory, evidencing the industry is far from sustained, healthy growth. The industry saw a slight improvement in its same-store sales during September; though this small growth in sales will likely be short lived given the current political and economic conditions and the resulting effect on consumer sentiment. This was reported by Black Box Intelligence and People Report through The Restaurant Industry Snapshot for September, released this week.

 

Same-store sales were 0.1 percent for September, a 0.2 percent improvement from the growth reported for August and the first month since May in which same-store sales were positive for the restaurant industry. For Q3 2013, same-store sales were -0.2 percent, which represents a -0.6 percent drop from what was reported in Q2. “The latest quarterly results highlight how the last year has been very tough for the industry, with three of the last four quarters showing a decrease in same-store sales,” says Victor Fernandez, executive director of insights and knowledge for Black Box Intelligence and People Report. “The problem continues to be rooted in traffic, with a continuously diminishing number of restaurant visits compared with the numbers seen in previous years.”

 

Traffic growth in comparable stores remained negative during September at -1.9 percent, a 0.3 percent decline from the traffic growth reported for August. The results for the quarter were equally challenging, with overall Q3 same-store traffic at -1.8 percent. “Although guest counts continue to drop, there is some encouraging news in the fact that Q3 was the second consecutive quarter in which traffic growth showed some improvement from the previous quarter,” Fernandez says. “The last time we saw two consecutive quarters of improvement was Q1 2012.”

 

The improvement in the sales and traffic metrics seen during September comes on the heels of the strengthening consumer outlook in recent months. The “Restaurant Willingness to Spend Index” released last week by Consumer Edge Research, a partner company to Black Box Intelligence and People Report, reported a value of 92 for September. “This was the third consecutive month with a value above 90 for this index, which we had not seen since the end of 2010. However, the value for September does show a slight decrease from the 93 reported for August, predicting that September might reverse course to declining results in both same-store sales and traffic, particularly with the government shutdown and impending debt ceiling deadline,” Fernandez says. “A positive indicator for the consumer, nevertheless, has been the declining gas prices across the country. In spite of high consumer sentiment and favorable energy prices we don’t see these factors or any others impacting sales and traffic for restaurants in a significant way.”

 

From a regional standpoint, the best performance in September was again reported by the Western region with 1.7 percent growth in same-store sales and -0.5 percent in traffic. For the fifth consecutive month the worst regional performance was reported for the Mid-Atlantic with same-store sales growth of -1.6 percent and -3.7 percent for traffic. The overall improvement in same-store sales seen at the national level also translated into improvements at the individual market level; 99 of the 182 DMAs covered by Black Box Intelligence posted positive growth in comparable stores during September, up from only 83 DMAs reporting positive sales growth the previous month.

 

The latest data published by People Report shows that although year-to-date turnover rates leading up to August have increased when compared to 2012, the latest month’s results produced a slight decrease in the rolling 12-month turnover for the restaurant industry for these two groups of employees. In terms of job creation by the industry, headcounts were estimated to have increased by 1.1 percent year-over-year during August. This represents a small drop from the 1.4 percent annual job growth rate reported for both June and July.