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Report: Restaurants struggle with traffic despite rising March sales

Report: Restaurants struggle with traffic despite rising March sales

The latest NRN-Miller Pulse survey shows improved same-store sales but continued traffic declines.

The hope of spring returned in March as improvements in the weather and a favorable Easter week shift helped turn restaurant industry same-store sales to positive territory for the first quarter, according to the latest NRN-MillerPulse report.

Restaurant same-store sales rose 1.8 percent in March, improving what had been a dismal quarter by 0.8 percent as a whole and offering hope that 2014 could turn out to be a “respectable year,” said Larry Miller, founder and chief executive of the monthly MillerPulse report.

If the March trend holds, sales could rise about 1.5 percent for 2014, noted Miller.

“The bad news is that the first quarter of 2014 still ranks as the second worst quarter in nearly four years,” he said. The thorn in the industry’s foot, however, remains guest traffic, which fell 1.1 percent in March, the report found.

“In fact, traffic has been positive in only three of the last 12 months, and was only positive in the fast-food segment in March,” Miller wrote. “As such, we doubt the March trend holds, particularly given the Easter shift benefit, meaning sales for the industry are likely to be lower than 1.5 percent for the year.”

A standout in March was the full-service segment, which lapped a challenging comparison to last year and showed an impressive 0.4-percent increase in same-store sales. While modest, the segment’s same-store sales over two years rose 2.3 percent, an increase of 830 basis points.

Traffic at full-service restaurants remained negative, falling 1.9 percent in March, but still improving 370 basis points over two years, according to the report.

Fine dining led the full-service sector, with same-store sales rising 4 percent in March on flat traffic.

The casual-dining segment saw same-store sales decline 0.2 percent, but that was an improvement over February’s decline of 1.7 percent. Looking at the two-year trend, casual dining same-store sales rose 1.1 percent in March.

Fast food reported the best trends in March, with same-store sales rising 4.8 percent. It was the only segment to show positive guest traffic, with an increase of 0.8 percent.

Fast-casual restaurants reported a same-store sales increase of 0.5 percent with a traffic decline of 1.8 percent.

Within the quick-service world, chicken concepts saw the biggest increase in March, with same-store sales rising 5.7 percent followed closely by burger concepts, which saw a 4.9-percent increase, the report said.

Looking ahead

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The outlook for April was evenly split, with operators expecting sales to improve the most toward the end of the month, the report said. In surveys, 38 percent of operators overall said they expect better sales in April, and 38 percent said they expect worse sales.

Operators in casual dining were the most optimistic, with 67 percent indicating sales would improve over the next six months, compared with 13 percent who expect declines.

With traffic still slow, operators expressed concern about their outlook for restaurant margins, the report said.

A net 14 percent of operators overall expect margins to worsen over the next six months, meaning 23 percent said they expect improvements while 37 percent expect margin declines.

Restaurant margins for March were 14.9 percent for the industry overall, falling 70 basis points compared with February and with improvement seen among quick-service restaurants and declines among full-service restaurants.

Commodity costs are also a concern. Operators said they expect commodity inflation of 2.4 percent over the next six months. Last month, their projection for inflation was 2 percent.

And given the continued declines in traffic, operators indicated their pricing power was weakening. Industrywide, pricing of 1.5 percent was expected in April, falling from the 1.7-percent increase expected in March and the 2.1 increase percent projected in February.

Restaurant chains and operators interested in participating in the MillerPulse survey for additional results and insights can register at MillerPulse.com.

This article has been revised to reflect the following correction:

Correction: April 16, 2014 An earlier version incorrectly reflected the operator outlook for margins. A net 14 percent of operators overall expect margins to decline over the next six months.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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