NEW YORK —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
As securities analyst Larry Miller at RBC Capital Markets said in a recent research note, an all-encompassing industry forecast “seems like a futile exercise.” There is too much uncertainty surrounding consumer behavior, unemployment rates and the financial sector’s time frame for a return to lending, analysts and operators say. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
Instead, smaller insights into holiday season sales, gas prices and commodity pressures have been offered. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
Pessimism still reigns supreme among operators, according to the National Restaurant Association’s October Restaurant Performance Index, which tracks the health and outlook of the U.S. restaurant industry through monthly operator surveys. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
(To view charts featured in this week's print issue, click here.) —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
“Pessimistic operators still outnumbered optimistic operators by a two-to-one margin,” the NRA said in November, referring to the 43 percent of restaurant operators who said they expected their sales volume in six months to be lower than the volume during the same six months a year earlier. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
The NRA’s Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators, including same-store sales, employees, capital expenditures and business conditions, stood at 97.6 in October, up 0.6 percent from September’s record-low level. Despite the gain, October represented the twelfth consecutive month in which the Expectations Index stood below the Index’s pegged value of 100. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
Analyst Miller provided two outlooks for the year ahead: a worst-case scenario and a best-case scenario. The doomsday case would include unemployment at 10 percent and a recession lasting several years. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
“We estimate restaurant traffic would decline an incremental 6.5 percent, or nearly $17 billion, in this scenario,” Miller said. “Earnings at our companies would fall an average of 65 percent from current levels.” —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
Using a rosier outlook, Miller said that “restaurant multiples will expand if there’s even a whiff of a potential economic recovery.” —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
In that case, the U.S. economy would bottom out at some point in 2009 and recover thereafter. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
“We estimate there’s upside of 50 percent to 160 percent based on U.S. recession history and restaurants’ historical average multiples,” Miller said. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
Miller did not offer a prediction on which case is more likely to occur. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
At Wachovia Capital Markets LLC, analyst Jeffrey Omohundro predicted worse restaurant sales through the remainder of the year, although he was optimistic that the declining cost of gas could have a favorable effect on disposable income and, in turn, the restaurant industry. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
According to Omohundro’s report, the U.S. Department of Energy has estimated that the average cost of gas will be $1.76 per gallon in 2009, which would save households about $120 per month, or $1,400 per year, compared with what consumers spent on gas in the third quarter of this year, when prices averaged $3.14 per gallon. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
Still, for the immediate future, the Wachovia Economics Group expects this holiday season to be the first on record—with the group’s records beginning in 1992—showing a year-over-year sales decline. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
“Negative retail-sales growth may translate into soft traffic and sales trends at restaurants to the extent that consumers shop less and are more budget-conscious than prior years,” Omohundro said. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
At Barclays Capital, restaurant analyst Jeffrey Bernstein suggested that 2009 commodity prices, while still at higher year-to-year levels, would not be as onerous as initially predicted. Most recently, the industry has benefited from pullbacks on the cost of grains and related proteins. —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
“While several of our companies have been able to secure much of their commodity needs at a level of inflation below our expectations,” he said, “many have noted that suppliers are pushing for quarterly rather than annual contracts and for floating- rather than fixed-rate contracts, both of which making the determination of necessary menu pricing difficult to forecast.” —Typically, this time of year is filled with brisk holiday-related sales and upbeat forecasts for the year ahead. Given the difficult and uncertain economic environment, however, many restaurant analysts and operators have begged off making any bold predictions for 2009.
