Same-store sales slowed during November, but still showed signs of strength, suggesting a positive fourth quarter for 2014, according to the latest Restaurant Industry Snapshot from TDn2K’s Black Box Intelligence and People Report.
Same-store sales rose 1.5 percent in November, a 1.3-percent decrease from the growth rate reported for October. However, the result represented the fifth consecutive month in which same-store sales registered positive growth. The last time the industry posted five consecutive months of positive sales growth was in the period ending February 2012.
“With the results for the fourth quarter through the end of November up 2.1 percent, we are projecting fourth quarter growing same-store sales in the 1.5 percent to 2.0 percent range, making us very optimistic about being able to report on three consecutive quarters of positive sales growth in 2014,” said Victor Fernandez, executive director of insight and knowledge for TDn2K, the parent company of Black Box Intelligence and People Report.
“This would be the first time since the third quarter of 2012 that the industry has experienced three quarters of positive same-store sales growth. Underlying this optimism is the fact that during December 2013, sales were very soft primarily due to bad weather,” he added.
In December 2013, the industry posted its second-worst same-store sales results — a decrease of 2.6 percent — of any month in more than two years.
“Last year’s extreme weather had a very negative impact on the restaurant industry,” Fernandez said. “As long as this year’s weather impact is no worse, we are facing relatively easy hurdles for our very important end-of-year, same-store sales calculations.”
For many operators and retailers, this is a make-or-break time for sales, he noted.
However, traffic again fell into negative growth territory. Same-store traffic decreased 1.1 percent for November, a 1.5-percent drop compared with the growth rate posted in October.
“On a quarter-to-date basis, at the end of November, same-store traffic growth [is down] 0.4 percent for the fourth quarter, which means that achieving positive traffic growth in comparable stores for the quarter might finally be within our reach,” Fernandez said. “We take into account current economic conditions, including reduced gas prices and the relatively easy comparisons for December based on last year’s abysmal traffic results during that month.”
The drop in traffic reported during November is congruent with the decline in consumer sentiment, measured by The Conference Board’s Consumer Confidence Index, which underperformed based on its expectations for November and fell to the its lowest value since June 2014.
While both same-store sales and traffic growth rates declined during November, compared with October, the drop in traffic was larger, indicating that average guest checks increased during the month. This reflects consumers spending more due to higher prices, a reduction in the use of promotions and a shift in sales mix towards higher-priced menu items. Another factor may be the continuing shift to online shopping versus mall shopping, impacting traffic year over year.
Regionally, restaurants again reported positive same-store sales growth in all regions of the country except the New York/New Jersey region. This comes on the heels of all regions of the country reporting positive growth during the previous three months. New York/New Jersey has now been the worst-performing region based on same-store sales for the last six months. The best-performing region for the second consecutive month was California. At the market level, November was also a relatively strong month for the industry, with 146 of the 192 DMAs tracked by Black Box Intelligence posting positive same-store sales.
In the workforce, competition for restaurant employees and managers continues to heat up as the industry opens new restaurants as the primary way of fueling sales growth. According to People Report’s latest results, restaurant job growth in October had a 4.3-percent year-over-year increase. Job creation has been trending at over 3.0 percent for more than a year.
In addition to the challenges of staffing new restaurants, the industry continues to experience replacement challenges due to rising turnover levels for both hourly employees and restaurant managers. The industry now faces a shrinking number of available potential employees in the form of unemployed persons, more positions to fill in new restaurants and an increasing number of vacancies to fill in existing restaurants due to turnover. Expectations from restaurant human resources practitioners, as reported in the People Report Workforce Index, are for increased labor-related pressures during the first quarter of 2015.
In addition to these challenges, pressures on wage increases continue and are expected to intensify as labor markets continue to tighten. Labor costs are also projected to increase within the next month as companies start to implement new and enhanced healthcare offerings to comply with the Affordable Care Act, as well as minimum wage increases passed in several states.
The Restaurant Industry Snapshot is a compilation of real sales and traffic results from more than 190 DMAs representing 110+ restaurant brands and more than 20,000 restaurant units that are clients of Black Box Intelligence, a TDn2K company. Data is reported in five distinct segments: casual dining, upscale/fine-dining, fast casual, family dining and quick service. Black Box Intelligence is a sister company to People Report, which tracks the workforce analytics of one million restaurant employees. TDn2K reports on over 30,000 restaurant units, one million employees and 45 billion dollars in sales. The Restaurant Industry Snapshot also includes the Restaurant Industry Willingness to Spend Index from Consumer Edge Research, a monthly household survey of more than 2,500 consumers.
