Restaurant operator optimism continues to fade
Nov. 1, 2013
by Keith Nunes
WASHINGTON – As food and beverage industry executives have announced quarterly earnings during the past few weeks, the U.S. economy has been a topic of discussion, and the September Restaurant Performance Index from the National Restaurant Association underscores why. For the fourth consecutive month the R.P.I. declined to 100.2 in September, down 0.3% from 100.5 in August.
“The R.P.I.’s September decline was due in large part to softer same-store sales and customer traffic readings, which were down from stronger levels in August,” said Hudson Riehle, senior vice-president of the Research and Knowledge Group for the N.R.A. “In addition, restaurant operators’ confidence in the economy continued to deteriorate, which was likely due to the fact that the government shutdown and debt ceiling debates occurred during the midst of the survey’s October fielding period.”
On Oct. 30, Tony Vernon, the chief executive officer of the Kraft Foods Group Inc., discussed the consumer’s mindset in a conference call with financial analysts.
“During the third quarter, we witnessed the value consciousness of the consumer intensifying,” he said. “This looks to be driven by a combination of factors – a prolonged decline in the labor participation rate, the burden of higher payroll taxes, and continued erosion in consumer confidence.”
Research released by The NPD Group, Chicago, confirms consumer demand for value may be growing. The research firm noted deal- and discount-driven restaurant visits in the U.S. have increased in 2013 after declining during 2012.
The R.P.I.’s current situation index, which measures current trends in same-store sales, traffic, labor and capital expenditures, stood at 99.9 in September, down 0.7% from a level of 100.7 in August. Restaurant operators reported softer same-store sales results in September, with 41% reporting a same-store sales gain between September 2012 and September 2013, down from 53% who reported higher sales in August. In comparison, 40% of operators reported a decline in same-store sales in September, up from 33% in August.
Operators also reported a dip in customer traffic levels in September, with 33% seeing higher customer traffic levels between September 2012 and September 2013. The figure was down from 45% of operators who reported a traffic gain in August. Meanwhile, 44% of operators reported a decline in customer traffic in September, up from 38% in August.
The R.P.I.’s expectations index, which measures restaurant operators’ six-month outlook, was 100.5 in September, up slightly from 100.4 in August. Despite the increase, the N.R.A. said restaurant operators are not as bullish about the market as they were during the first half of the year.
Restaurant operators’ outlook for sales growth in the months ahead remained relatively cautious. Thirty-four per cent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down slightly from 36% last month and the lowest level in 11 months. Meanwhile, 13% of restaurant operators predicted their sales volume in six months to be lower than it was during the same period in the previous year, compared to 16% last month.
Operators were also less optimistic about the direction of the economy. Only 19% said they expect economic conditions to improve in six months, down from 23% last month. Meanwhile, 28% of operators said they expect economic conditions to worsen in the next six months, up from 22% last month and the highest level in nine months.