Report: June same-store sales fall flat

Same-store sales were flat in June, according to the latest monthly MillerPulse survey, as both quick-service and casual-dining concepts struggled to bring customers in the door.

Same-store sales were flat for quick-service concepts and down 0.1 percent for casual-dining chains.

Yet traffic fell 1.9 percent for the month, the worst performance for the industry since the weather-hampered month of January 2014.

The results continue a surprising turn for the worse the industry has taken in 2016. Same-store sales growth has been below 1 percent every month this year but February, which had an extra day.

They have also been slowing down since January of 2015. That month, when restaurants were the beneficiaries of low gas prices and good weather, same-store sales rose 5.3 percent. Same-store sales had been slowing gradually ever since.&lt;/p&gt; &lt;p&gt;Larry Miller, cofounder of the survey, suggested two things are causing the slowdown. &amp;ldquo;Aggressive pricing at grocery stores has clearly stunted restaurant sales,&amp;rdquo; he said. &amp;ldquo;And this sales slowdown is being exacerbated by the supply growth over the past several years.&amp;rdquo;&lt;/p&gt; &lt;p&gt;As food costs have come down, grocery stores have been lowering prices. Food at home prices were down 1.3 percent year over year in June, according to federal data. By comparison, restaurant prices were up 2.6 percent year over year. That&amp;rsquo;s a huge, 3.9 percent gap.&lt;/p&gt; &lt;p&gt;Yet, at the same time, overall restaurant sales have been up for much of the year. Restaurant sales are up 4.9 percent year over year, according to federal data. Those numbers take into account new locations as well as same-store sales, suggesting that smaller chains, independents and expanding chains are generating sales and taking traffic away from existing locations.&lt;/p&gt; &lt;p&gt;Comparisons might be part of the problem, too. Same-store sales averaged 3.8 percent in the first six months of last year, the months corresponding with the current, slow results.&lt;/p&gt; &lt;p&gt;Yet the two-year same-store sales results have definitely slowed as the year has gone on. Two-year numbers factor out one-time events that can influence a single month&amp;rsquo;s or quarter&amp;rsquo;s same-store sales.&lt;/p&gt; &lt;p&gt;In January, two-year same-store sales according to MillerPulse were 6.1 percent, highest for the index in years. That two-year number has slowed five of six months since and in June was down to 2.7 percent. &amp;ldquo;The two-year sales trend in the second quarter was the lowest since the second quarter of 2014,&amp;rdquo; Miller said.&lt;/p&gt; &lt;p&gt;The weakness for much of the year has come from both quick-service and casual-dining chains. But weak quick-service traffic has been more surprising. Casual dining sales and traffic have been struggling for years.&lt;/p&gt; &lt;iframe class="highcharts-iframe" src="//cloud.highcharts.com/embed/utupeb" style="border: 0; width: 100%; height: 500px"&gt;

Quick-service traffic fell 1.3 percent in June, the third straight month of declines after a winter in which chains like McDonald’s Corp., The Wendy’s Co. and Burger King competed aggressively on price to get more customers.

Casual-dining traffic fell 2.5 percent. That was the worst traffic number for casual dining since February 2014.

“When sales and traffic are weakening, it’s hard to see the bright side,” Miller said.

Still, Miller said that margins should be strong in the industry because there is “little or no cost pressure.”

And he believes the pricing gap between restaurants and grocers should diminish over time as food costs bottom out and grocers’ ability to cut prices is reduced.

In addition, comparisons for the industry get easier. “That said, the sales gains are likely to be small,” Miller said. “Probably 1 to 2 percent above current levels.”

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze

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