Restaurant sales drop as consumers cut spending

Written by admin   // February 25, 2013   // 0 Comments


Consumers ordered fewer premium entrées in January, the NRN-MillerPulse survey finds
by Charlie Duerr, courtesy of Restaurant News
Restaurant industry same-store sales declined in January due to pullback from consumers, according to the latest NRN-MillerPulse survey.
Contributing to the same-store sales dip at restaurants is a significant drop in premium entrée orders, possibly due to consumer frugality after increases in the payroll tax, according to MillerPulse.
MillerPulse, an operator survey exclusive to Nation’s Restaurant News, questioned operators from 53 restaurants in February regarding January sales, profit trends, performance and outlook. Respondents included operators from all regions of the country that represent the quick-service, casual-dining, fine-dining and fast-casual segments. Those surveyed in January represented restaurants that booked about 18 percent of industry sales.
Overall, industry same-store sales rose 1.1 percent in January, a significant drop from the 2.4-percent increase reported in December, with both main segments contributing to the results. Quick-service restaurants, which include both fast-food and fast-casual brands, reported a 1.6-percent increase in sales in January compared with a 2.5-percent increase the month prior. Sales at full-service restaurants, which include both casual-dining and fine-dining brands, rose 0.6 percent in January, compared with the 2.2-percent increase in December, the survey found.
“Operators are unsure of what the cause of the slowdown was,” said Larry Miller, restaurant securities analyst at RBC Capital Markets and creator of the monthly MillerPulse surveys. “They cited a laundry list of reasons, including weather, holiday shifts, gas prices and tax refund delays.”
Miller believes one key factor may be the increased payroll tax, which took effect at the beginning of the year. Of the operators surveyed in February, 35.9 percent said that the tax had an impact on same-store sales or average check, 25.6 percent said it did not and 38.5 percent said it was “unclear” at the moment.
The tax has the potential to dampen traffic and sales, he added, and if it proves to have an impact, it is one that is not likely to go away anytime soon. “If the payroll tax is indeed hurting sales, the impact could be longer lasting,” he said. “Potentially all of 2013.”
Consumers may be responding to the impact of the tax by ordering fewer premium entrée orders, a trend that has occurred since May 2012. And while an uptick happened in December, perhaps from consumers splurging during the holiday season, the survey found that the net percentage of operators surveyed in February experiencing a softer trend in premium entrées was the highest it has been since the summer of 2011, when the U.S. debt rating was downgraded.
“I think it speaks to larger trend of pricing power being more limited in 2013,” Miller said. “This stems from the rise in promotions and discounting to maintain traffic level, which aren’t growing as fast as the number of restaurants.”
Still, there were a few bright spots in this month’s report. After showing a significant decline in January, consumer spending plans were stronger at every restaurant segment in February, and operators were optimistic about February same-store sales. A net 9 percent of operators believed that February sales would be better than January, the survey found. That number was calculated by subtracting the 24 percent of operators who thought sales would be worse in February from the 33 percent that believed things would be better. For the next six months, however, the outlook remains split, with quick-service restaurants expecting positive results and full-service restaurants expecting tough times to continue.
The survey found that while the industry as a whole is generally optimistic about the future, operators have serious concerns. “Operators are significantly worried about guest traffic,” Miller said, “which leaped to the number one concern for the first time since 2009.”


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