Restaurant industry outlook remains uncertain

 
July 30, 2009
The restaurant industry's economic challenges continued to persist in June, as the National Restaurant Association's comprehensive index of restaurant activity declined for the second consecutive month. The association's Restaurant Performance Index (RPI) stood at 97.8 in June, down 0.5 percent from May and its 20th consecutive month below 100.
 
"While there are signs that suggest an improvement may be on the horizon, the latest figures indicate that the restaurant industry's recovery has yet to gain a firm foothold," said Hudson Riehle, senior vice president of Research and Information Services for the association. "Restaurant operators continued to report declines in same-store sales and customer traffic in June, and their outlook for sales growth in the months ahead remains mixed."
 
Situation Index
The association's Current Situation Index, which measures trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 96.6 in June – down 0.3 percent from May and its lowest level in three months. Additionally, June represented the 22nd consecutive month below 100, which signifies contraction in the current situation indicators.
Restaurant operators continue to report soft same-store sales, with June representing the 13th consecutive month of sales declines. Results included:
  • Only 22 percent of restaurant operators reported a same-store sales gain between June 2008 and June 2009, down from 26 percent who reported a sales gain in May and the lowest reading in the seven-year history of the RPI.
  • Sixty-one percent of operators reported a same-store sales decline in June, up slightly from 60 who reported negative sales in May.
Restaurant operators also reported negative customer traffic levels in June, marking the 22nd consecutive month of traffic declines. Results included:
  • Nineteen percent of restaurant operators reported an increase in customer traffic between June 2008 and June 2009, down from 22 percent who reported similarly in May.
  • Sixty percent of operators reported a traffic decline in June, compared to 59 percent reported lower traffic in May.
Although sales and traffic levels softened in recent months, capital spending activity remained relatively steady. Forty-two percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, compared to 41 percent who reported similarly last month.
 
Expectations Index
 
The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 99.0 in June – down 0.7 percent from May and its second consecutive decline after rising to a 19-month high in April.
 
The recent decline in the Expectations Index was largely due to restaurant operators' dampened outlook for sales growth in the months ahead. Results included:
  • Twenty-four percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 29 percent last month.
  • In comparison, 33 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, matching the proportion who reported similarly last month.
Restaurant operators also are less optimistic about the economy, compared to recent months. Results included:
  • Twenty-six percent of restaurant operators said they expect economic conditions to improve in six months, down from 34 percent who reported similarly last month.
  • Meanwhile, 26 percent of operators expect economic conditions to worsen in six months, up from 17 percent who reported similarly last month.

Topics: Associations , National Restaurant Association , Operations Management


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