NEW YORK —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
Though the upticks in sales might be slight and stem from only short-lived positive factors, quarterly performances by such players as Carl’s Jr., Hardee’s, McDonald’s, Wendy’s, California Pizza Kitchen, Olive Garden and www.redlobster.com Red Lobster were among those cited in analysts’ newly upbeat outlooks for a soft landing next year. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
“As [an] early-cycle [industry], restaurants typically rally two quarters before the macro turns,” said John Glass, restaurant securities analyst at Morgan Stanley & Cos. “Based on our current macro forecast, this implies [the restaurant] group gets interesting by the fourth quarter.” —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
Operators remain less optimistic, however, attributing recent bumps in sales to such short-term factors as new products and promotions or even the government’s recently mailed tax refund checks, versus an apparent end to the economy’s troubles. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
So far this year, restaurant sales have suffered as consumers rein in spending in the face of escalating gas prices, lower home equity values, layoffs and fears of unemployment. Most restaurant chains, excluding such bellwethers as Chipotle, Burger King and Panera, have reported negative same-store guest traffic, if not negative same-store sales results despite increased menu prices. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
This month, however, a handful of reports offered some positive news on improved same-store sales, especially when compared sequentially with the first quarter of this year. California Pizza Kitchen lifted its second-quarter earnings guidance on a better-than-expected same-store sales increase of 1.4 percent. And Wendy’s said its franchisees, which account for about 84 percent of the chain, posted a second-quarter same-store sales gain of 1.1 percent, up from negative territory in the first quarter. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
According to research from consumer analyst Sharon Zackfia at William Blair & Co., the average second-quarter same-store sales result from a select group of restaurants rose 0.8 percentage points from the first quarter of this year. Her research included Carl’s Jr., Hardee’s, McDonald’s, Wendy’s, California Pizza Kitchen, Longhorn Steakhouse, Olive Garden and Red Lobster. In the first quarter, the group’s average same-store sales increase was 0.9 percent. In the second quarter, it was a 1.7-percent gain. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
Most operators stayed mum on explaining their sales bumps, or pointed to the new products or promotions at their respective chains, like the Thank You Card program that encourages repeat visits at California Pizza Kitchen, or Frosty Shakes and Chicken Go Wraps at Wendy’s. Analysts and observers said federal stimulus checks that some consumers received in May and June could have helped to lift sales in those months. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
“While it is difficult to ascertain the sustainability of this improvement due to the potential benefit of tax rebates on recent results, we believe [it]…is likely to represent a broader improvement in restaurant sales,” Zackfia said. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
Restaurant operators, however, aren’t quite as sure about any broader improvement. According to research from the National Restaurant Association, the slight sales lift that began in May was not enough to change future perceptions among operators. The latest NRA Expectations Index, which is a monthly measure of operators’ outlooks for the future, fell to its lowest level on record in May. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
Restaurant operators remain pessimistic about sales growth in coming months, the NRA study said. Twenty-nine percent of restaurant operators expect to have higher year-to-year sales in six months, while 37 percent of restaurant operators expect their sales volume in six months to be lower than a year ago. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
Restaurant operators also grew more pessimistic about the direction of the economy, the NRA said. Just 12 percent of operators expect economic conditions to improve in six months, the lowest level on record. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
California Pizza Kitchen co-chief executives Rick Rosenfield and Larry Flax underscored the bearish outlook for the months ahead even after reporting a second-quarter sales surge that boosted their stock price 4.6 percent to $11.69 on July 10. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
“Despite our better-than-expected performance, we are not adjusting full-year 2008 guidance at this time due to limited sales visibility and an ongoing concern for the economy,” Rosenfield and Flax said in a statement. —Improved sales results divulged in preliminary second-quarter reports by several leading chains this month have prompted some foodservice analysts to predict that a turnaround for the slumping industry could begin in just a few more quarters.
