As the stock market declined this summer, consumer confidence crumbled and economic outlooks became more “double dip” than “slow recovery,” it seems no one told the restaurant customer, who continued to dine out and drive industry same-store sales.
The latest MillerPulse operator survey, an exclusive to Nation’s Restaurant News, found that industry same-store sales rose 2.3 percent in August, about flat from a same-store sales increase of 2.1 percent in July and above August 2010 growth of 1.2 percent.
“The August sales results support the view that there is more fear than fact about business trends,” said Larry Miller, restaurant securities analyst at RBC Capital Markets in Atlanta and creator of the monthly MillerPulse surveys and research.
“All our consumer metrics were pointing down, yet sales never fell,” he said.
The MillerPulse surveys poll more than 100 restaurant operators across the country on sales and profit trends, expectations and concerns. The respondents include executives from major chains and regional brands that, in aggregate, represent more than 18 percent of total industry sales. All segments of the restaurant industry, from fine dining to quick service, are represented.
Prior to this latest data showing stabilized sales trends, which was collected in early September, operator pessimism was palpable. The majority of respondents to the MillerPulse survey in August said they expected same-store sales to drop. It was the first time in the survey’s three-year history that expectations showed a net negative result.
In that August survey, participants labeled most key business aspects as unfavorable; the outlook for credit access, guest traffic, pricing power and food costs all deteriorated in the eyes of operators. Economic worries also supplanted commodities as operators’ top concern.
That changed in the September survey when operators saw sales remain steady, and as a group they became less concerned that economic woes would lead to reduced traffic and spending. Expectations on sales, margin and pricing power each improved. Commodity pressures once again overtook macro-economic worries as the top concern among all operators. Among quick-service survey respondents, top concerns were the economy, commodity pressure and cash-flow or margin pressures. Among full-service operators, top concerns were commodities, traffic and the economy.
“The September outlook is a sharp reversal of August, when operators expected worse sales — an outlook that did not pan out,” Miller said.
In August, quick-service segment same-store sales rose 2.6 percent, which some operators pegged to improved check averages aided by menu price increases. Full-service same-store sales rose 2 percent in August, with operators explaining that sales especially picked up in the second half of the month. About 27 percent of the operator survey pool is based in the Northeast, which as a group cited some sales falloff from Hurricane Irene.
Looking ahead, operators in each restaurant sector except for fine dining said they expect same-store sales trends to improve over the next six months. The outlook for the quick-service segment, a net 33 percent positive, equaled that of the fast-casual segment. Casual dining netted a 14-percent positive result. Scores are based on the number of respondents expecting “better” results minus those expecting “worse” results.
The survey group’s expectations on pricing also improved, with respondents on average saying they would be able to run an increased pricing rate of 1.6 percent over the next six months, up from the 1.5 percent they expected in July and August. The spring and summer block of April, May and June was a period when most operators felt they could pass price to the consumer. At that time, operators said they expected to run increased pricing rates of 1.8 percent in April and May, and 1.7 percent in June.
A comment from a surveyed operator — who will remain anonymous as individual results and survey names are not released — noted both external and internal factors driving the ability to increase prices:
“Food-at-home prices and fast casual have given us some room to price to cover food costs,” the respondent said.
When it comes to those food costs, most restaurants say they are still challenged by increasing commodity costs. Over the next six months, operators expect commodity inflation of 1.9 percent, which edged up from expectations in August, according to the survey. Most of the inflation is centered on corn, dairy, ground beef, chicken and steak, according to the survey respondents.
Contact Sarah E. Lockyer at sarah.lockyer@penton.com.
MillerPulse has teamed exclusively with Nation’s Restaurant News to provide industry-leading benchmark data on same-store sales trends and operator sentiment.
Each month, participants take a short survey and receive a deep analytical report from analyst Larry Miller. Participation is free and confidential. Register at: www.nrn.com/industry-insight.
