Restaurant chains’ same-store sales rose 3 percent industrywide in July, and traffic inched ever so slightly into positive territory, according to the latest NRN-MillerPulse report released Friday.
Larry Miller, founder and chief executive of the monthly MillerPulse report, said the sales gains were most likely the result of McDonald’s shedding market share, but the healthier U.S. economy also helped.
Weighted toward larger chains that participate in the MillerPulse survey, industry same-store sales showed a modest increase of 0.7 percent in July, indicating that major brands were weighing down the industry. McDonald’s, for example, reported a 3.2-percent decline in same-store sales in the U.S. for July.
All restaurant segments improved in July, but quick service recorded the best results, with a 3.4-percent sales gain, though traffic fell 0.1 percent for the segment.
Casual dining, meanwhile, reported sales climbing 1.5 percent, though traffic decreased 1.1 percent.
However, Miller said there is evidence that the larger casual-dining players are outperforming the segment as a whole.
Weighted same-store sales rose 2.6 percent, reflecting gains among the largest chains, compared with quick service’s weighted increase of 0.4 percent.
“If trends continue — and we expect them to, given the positive consumer data of late and the easier comparisons ahead — sales would be up 2.7 percent for the second half of 2014 and up 2 percent for 2014, which isn’t bad considering the slow start,” Miller said.
There is reason for optimism.
The economy is adding more than 200,000 jobs per month, and future restaurant spending rose 4 points compared to a year ago, according to research firm ChangeWave.
July’s sales gains also appeared to be broad-based, said Miller, with 70 percent of MillerPulse companies saying business was equal to or better than June.
Still, Miller said, traffic remained “uninspiring,” despite inching into positive territory for the month, with a 0.1-percent increase industrywide.
The July report does not break out fine dining, which is a small sample, but was largely credited with lifting traffic results into positive territory.
Meanwhile, operators surveyed by MillerPulse also indicated they are upbeat about August results.
Sixty-one percent of respondents said they expect better sales in August, and none said they expect worse. August started off well, with sales rising 2.7 percent for the first week, the report said.
A net of 5 percent of operators expect margins to improve over the next six months, meaning 29 percent expect better margins, while 24 percent expect worse. Industrywide, restaurant margins were 14.9 percent in July, a 90-basis-point drop from June.
Operators said they expect commodity inflation of 2.7 percent over the next six months, a slight decrease from the 2.8-percent inflation expected in June.
Given the weak traffic trends, however, pricing expectations remain low. Quick-service chains expect to raise prices 1.9 percent over the next six months, and casual-dining chains expect to raise prices 1.1 percent.
MillerPulse results are based on a monthly survey of operators averaging more than $40 billion in industry sales, representing all regions of the country and across the quick-service, casual dining and fine dining segments. Restaurant chains and operators interested in participating in the MillerPulse survey for additional results and insight can register at the MillerPulse website.
Contact Lisa Jennings at firstname.lastname@example.org.
Follow her on Twitter: @livetodineout