NEW YORK As restaurants close out the current third quarter and look ahead to the final months of 2009, many had predicted a fourth quarter of easier comparisons to a year ago and a consumer getting ready to spend more freely, both of which would spark an industry recovery.
It seems they are not so certain of that today.
While fourth-quarter sales and profit performances will benefit from comparisons to a year ago when financial markets first started to crumble and took consumer spending along with it, the sales and economic environment may not have improved enough to help restaurants, sources say.
According to RBC Capital Markets Operator Survey, released in a research report last week, restaurant operators were evenly split on what easier sales comparisons may mean. A full 50 percent said sales would not change from depressed current levels despite the lapping of easier comparisons. A similar 46 percent said sales would improve versus a year ago.
“As we enter the fall of 2009, there are equally strong bull and bear cases for restaurant stocks,” said RBC securities analyst Larry Miller.
In the bull camp, observers point to the easier comparisons to a year ago, improved cost structures at many restaurant companies that will help margins and the signs of upticks in economic data, from consumer confidence to housing data. In the bear camp, however, observers point to a summer sales slump that may not improve in the fall and rising U.S. unemployment rates.
Miller also talked with Yum! Brands Inc. chief executive David Novak and Texas Roadhouse Inc. chief executive G.J. Hart, both of which said they were not confident that the sales softness of the summer would turn around this fall.
According to Miller, Novak called the current environment the worst he had ever seen, and noted that Yum is planning for this environment to last through 2010.
Contact Sarah E. Lockyer at [email protected].
