The year continues to be disappointing for the restaurant industry as February again resulted in negative same-store sales, according to Black Box Intelligence and People Report from “The Restaurant Industry Snapshot for February,” released this week. This represents the third consecutive month in which this key metric has shown decreasing sales, which hasn’t occurred in over three years.
Same-store sales growth in restaurants was -0.7 percent during February, which is a small 0.2 percent improvement from the -0.9 percent rate reported for January.
“As has been the case with the previous three months, weather has been the key factor driving down sales for the restaurant industry,” says Victor Fernandez, executive director of insights and knowledge for TDn2K, parent company of Black Box Intelligence and People Report. “However, the results for February and the slight improvement from January are deceiving. The reality is February of last year was a horrible month for the industry as a perfect storm of rising payroll taxes, political uncertainty, and bad weather hit the country and drove same-store sales to almost -5.0 percent for the month, the worst results since the period immediately after the end of the recession in 2009. Under that perspective, the -0.7 percent posted by the industry in February 2014 is very concerning when analyzed on a two year basis.”
As has been reported in the past, declining same-store guest counts continue to be the main problem for restaurants. February posted same-store traffic growth of -3.2 percent, the second worst growth rate in the last 12 months. Although same-store sales improved slightly over January, traffic actually worsened by 1.0 percent on a same-store basis.
“As was the case with sales, to keep these latest results in perspective we need to remember that we are calculating those growth rates compared with one of the worst months we have seen in recent years; February 2013 posted guest count growth of about -6.0 percent,” Fernandez says. “The reality is February of 2014 was very bad for the industry, but this got obscured by the fact that February 2013 was also terrible.”
The Restaurant Willingness to Spend Index, published by Consumer Edge Research, posted a value of 94 for the second consecutive month in February. This means that the value of this index has been over 90 for 7 of the last 8 months, which hasn’t been seen in more than 3 years.
“We believe there continues to be pent up demand that is not materializing in additional restaurant visits and sales due to the winter storms. However, the effect on consumers’ wallets due to the rising heating costs this season is a concern for the next few months,” Fernandez says.
The Thomson Reuters/University of Michigan consumer confidence index improved slightly during February, supporting the idea that consumer spending may pick up during March and April as weather starts becoming less of a barrier.
According to the latest results published by People Report, the growth of the industry has been fueled primarily through new restaurant openings, which is reflected in the 3.3 percent year-over-year job growth reported for January, which reflects a small 0.1 percent increase from December but more importantly, is the third consecutive month with jobs growing at a pace of over 3.0 percent. Staffing pressures are also being reflected in turnover, which again continued its upward trend for both restaurant managers and restaurant hourly employees on a rolling 12-month basis.