Restaurant companies are suffering from a bad case of winter blues this year, and it’s not just record-cold temperatures, snow and ice keeping guests at home.

Wall Street analysts predict that rising heating bills will take a cut of already limited consumer discretionary spending, serving as a “crowding out” factor that will likely last through late spring.

Charles Grom, analyst with Sterne Agee, estimated in a report released Wednesday that natural gas bills — the primary source of heat for about half of U.S. households — will rise about 73 percent this winter, translating to about a 6-percent drag on consumer spending, with particular ramifications in the Midwest and Northeast.

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The average heating bill in 2012 was about $768 for natural gas, but Grom projects this year’s spending will be closer to $1,326, and will impact spending into the spring, given the delay as consumers receive their heating bills.

“We’re incrementally concerned that retail sales could stay under duress, particularly given the ‘sticker shock’ impact from these higher bills,” he wrote.

It has been a bad winter, the second coldest since 1970, writes Grom, with the most snow in three years. Wisconsin, Minnesota and Iowa have experienced double-digit declines compared with last year, and Midwestern and Northeastern states have all suffered colder winter months compared to the previous year. Ironically, the warmest state was Alaska, Grom noted.

Grom pointed to Sonic as one brand that might be hit particularly hard by the weather, in part because of its drive-thru model, but also because almost 79 percent of the chain’s store base is in states hit by the cold.

Other analysts pointed to companies like Potbelly Corp., Bravo Brio Restaurant Group Inc., Panera Bread Co., Chipotle Mexican Grill Inc., Noodles & Company, and Del Frisco’s Restaurant Group Inc. as being vulnerable, based on locations in weather-impacted states.

The weather was largely to blame for negative Knapp-Track results in January, according to other analyst reports. The same-store sales index for casual dining fell 2.6 percent in January, a sequential improvement over the 6.1-percent decline the index showed in December. Casual-dining traffic fell 4.4 percent for the month, which was the same decline Knapp-Track reported in December.

Stephen Anderson, senior analyst for Miller Tabak + Co. LLC, predicted comparisons will be easier for restaurant companies in February and March. Fundamentally, Anderson sees an improving macroeconomic backdrop that will benefit restaurant companies despite the temporary weather volatility.

“We argue continued improvement on payrolls and thus on discretionary income remain more powerful longer-term indicators on the health of the restaurant sector,” he wrote.

Barring unforeseen shocks, like a spike in fuel prices, he said, “we expect a sustained rebound in the same-restaurant sales in the next couple of quarters to the positive 1 percent to 2 percent range.”

Consumers less pessimistic on economy

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Nicole Miller Regan, a senior research analyst with Piper Jaffray, wrote in a report released Wednesday that December monthly sales at places serving food and drinks rose 4.1 percent in December to $47,571, according to the U.S. Census Bureau. Meanwhile, monthly sales at grocery stores increased 3.8 percent on a year-over-year basis, to $49,360.

“Historically, the dollar gap between grocery stores and foodservice sales had been flattening, with grocery store sales higher than foodservice sales,” she wrote. “Food away from home contributed 49.1 percent of total sales, an increase of 10 basis points compared to last year.”

In a separate report released Wednesday, Miller Regan also cited data from restaurant consulting group and research firm AlixPartners, which said in a recent “State of the Restaurant Industry” webinar that consumers expect to spend about 9 percent less per restaurant meal this year.

After asking consumers what they expect to spend on restaurant meals in the next 12 months, AlixPartners projected the average would dip to $13.55 this year compared with $14.91 last year.

When asked how often they expect to dine out within certain restaurant segments, consumers indicated they expect to eat more often at convenience stores, fast-casual restaurants and fine-dining establishments, compared with the prior 12 months.

Dining at grocery stores is expected to decline, and consumers also say they will eat slightly less often at quick-service and casual-dining restaurants.

Consumers also appear to be less pessimistic about the economy, with 47 percent saying they feel “bad” or “not good” in the first quarter of this year, falling from the 56 percent who said the same two years ago.

More consumers described themselves as neutral about the economy this year — 31 percent versus 25 percent two years ago — indicating a “wait-and-see” position, Miller Regan noted.

As a result, consumers are still searching for value when dining out, she wrote. That trend will only further the “blurring of the lines” between industry segments, Miller Regan argued.

“These trends could help spur the next round of culinary innovation similar to what we saw with the advent of small plates and shareable dishes, which, despite carrying a lower price point versus a typical entrée, proved to be at least margin neutral (and often accretive), as well as an incremental traffic driver,” she wrote.

Despite the weather and continued malaise about the economy, Miller Regan remains positive on the restaurant industry, especially brands that utilize what she calls a “perfect recipe for restaurant success” by having brand equity, deploying asset-light growth and capitalizing on licensing opportunities.

Contact Lisa Jennings at
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