Industry News | March 3, 2013

Restaurant Performance Index Hits 5-Month High in January

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Driven by a more optimistic outlook among restaurant operators, the National Restaurant Association’s (NRA) Restaurant Performance Index (RPI) rose to its highest level in five months. 

The RPI—a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry—stood at 100.6 in January, up 1.0 percent from December and its highest level since August 2012. 

In addition, January represented the first time in four months that the RPI rose above 100, which signifies expansion in the index of key industry indicators.

“Although the current situation indicators were mixed January, restaurant operators were decidedly more optimistic about sales growth and the economy in the months ahead,” says Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Operators’ outlook for same-store sales, capital spending, and the overall economy all improved, which propelled the Expectations Index to its highest level in eight months.”

The RPI is constructed so the health of the restaurant industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction for key industry indicators.

The Index consists of two components: the Current Situation Index and the Expectations Index.

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor, and capital expenditures), stood at 99.7 in January, up 0.6 percent from December’s level. 

Although restaurant operators reported net positive same-store sales results in January, softness in the customer traffic and labor indicators outweighed the performance, which resulted in a Current Situation Index reading below 100 for the fifth consecutive month. 

Although restaurant operators reported net positive same-store sales for the 20th consecutive month, results remained mixed in January. Forty-four percent of restaurant operators reported a same-store sales gain between January 2012 and January 2013, while 37 percent of operators reported lower sales. 

In December, 42 percent of operators reported higher same-store sales, while 38 percent reported a sales decline.    

While overall sales remained positive in January, restaurant operators reported a net decline in customer traffic for the second consecutive month. Thirty-three percent of restaurant operators reported higher customer traffic levels between January 2012 and January 2013, while 40 percent of operators said their traffic declined. 

In December, 31 percent of operators reported an increase in customer traffic, while 48 percent reported lower traffic levels.

Despite the mixed sales and traffic results, restaurant operators reported an increase in capital-spending activity. Fifty-two percent of operators saying they made a capital expenditure for equipment, expansion, or remodeling during the last three months, up from 45 percent who reported similarly last month.

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 101.6 in January, up 1.3 percent from December’s level. 

January’s solid gain was driven by improvements in each of the forward-looking indicators, and resulted in the highest level for the Expectations Index in eight months. 

Restaurant operators’ outlook for sales growth continues to improve from the uncertain period surrounding the fiscal cliff at the end of 2012. 

Forty-six percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 37 percent last month and the highest level in seven months. 

Meanwhile, 17 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, essentially unchanged from 16 percent last month.

For the first time in four months, restaurant operators have a net positive outlook for the overall economy. Thirty percent of restaurant operators said they expect economic conditions to improve in six months, up from just 17 percent last month. 

Meanwhile, 20 percent of operators said they expect economic conditions to worsen in the next six months, down from 29 percent who reported similarly last month. 

Restaurant operators are also more bullish in their plans for capital spending in the months ahead. Fifty-nine percent of restaurant operators plan to make a capital expenditure for equipment, expansion, or remodeling in the next six months, up from 50 percent who reported similarly last month.