NEW YORK The Nation’s Restaurant News Stock Index followed the general market into new depths last week, hitting its lowest value so far this year as well as its lowest point in the past 52 weeks.
As market forces continued to focus on the declining financial services sector, the unclear shape of a federal bailout plan and the new heights of unemployment, restaurant stocks were hard hit. The NRN Stock Index fell last week by 26 points, or 3.0 percent, to close Friday at 835.11 – one of the lowest closes going back at least to 2004. The index is market-cap weighted and holds all 60 public restaurant companies.
So far in 2009, the index has ranged from as high as 1,054.66, which it hit on Jan. 6 during that month’s short-lived rally, to as low as 815.23, which the index hit on Friday. Still, restaurants have outperformed the general market. Last week, the Dow Jones Industrial fell nearly 436 points, or 6.2 percent, while the S&P 500 Index fell 51 points, or 7.0 percent. The NYSE Composite fell 7.2 percent for the week, and the Russell 2000 Index fell 10.2 percent.
Even as restaurants have suffered slowed sales amid the domestic recession and public company stocks have taken a beating, industry analysts have pointed to the resiliency of the sector.
“We believe that over the longer term, restaurants have seen a reduction in cyclicality driven by an increase in dual-income families and a corresponding decrease in time available for families to cook at home,” said Jeff Omohundro, a securities analyst at Wachovia Capital Markets LLC. “In our view, this work-family dynamic has helped to create a growing demand for convenient meal solutions, which we think has helped to support an element of resiliency in restaurant industry sales.”
This week, McDonald’s is expected to report February same-store sales on Monday, and a dozen companies will present at the Bank of America-Merrill Lynch Consumer Conference on Wednesday and Thursday.
“We expect the tone of presentations at our conference to be cautious,” said Bank of America-Merrill Lynch analyst Joe Buckley. “There are some marginally positive signs for the industry, but it’s important to remember a moderating rate of sales decline still reflects a year-over-year decline. For most companies, moderating costs are in similar fashion, not down enough yet to be favorable year over year.”
At Oak Brook, Ill.-based McDonald’s, same-store sales will be handicapped by a difficult comparison to a year earlier, when the chain benefited by about 4 percentage points from Leap Year. Many analysts said they expect the No. 1 burger brand to post flat, if not slightly negative, results for February.
Contact Sarah E. Lockyer at [email protected].