This Week In Foodservice: What Role did Sandy Play in October's So-So Restaurant Sales?

With many people very jittery about the state of the overall economy, many observers are wondering about the impact of Hurricane Sandy on the foodservice industry. This Week In Foodservice sheds some light on the subject and takes a closer look at a variety of industry-related economic indicators.

The U.S. Census Bureau reported advance retail sales data for October declined by 0.3 percent from September but total retail sales were up 3.8 percent compared to October 2011.

The advance sales report for restaurants and bars followed a similar pattern with sales dropping 0.4 percent from September but increasing 4.2 percent over October 2011. The average increase over the past year has been running roughly 7 percent. (Please bear in mind that the statistics cover restaurants and bars only, are advance number subject to revision, and are adjusted for seasonal differences, such as number of days in the month, holidays, weekends, etc. but not for inflation.)

The big question many people have is what effect did Hurricane Sandy have on the data? The Census Bureau provided two pages of FAQs and while they are too long to reproduce here there are two key takeaways: the study is designed to monitor sales on a nationwide basis so Bureau cannot isolate the regional results and, second, the bureau has some indication that Sandy had a positive as well as a negative impact on sales. As we pointed out last week, restaurants that were able to operate enjoyed sales way heavier than usual from people who could not cook at home.

Economic News This Week

  • First-time jobless claims shot up by 78,000 to 439,000 for the week ending Nov. 9. This is the highest number of claims in 18 months and the biggest increase in claims since 2005. Once again we have Sandy rearing her ugly, wet head. The increase in claims is undoubtedly due in part to a delay in filings from the week ending Nov. 2. Labor experts blame Sandy's impact for masking the real direction of the employment picture. Some say it will take a few weeks for a normal pattern to emerge while others believe it could be mid-January before the claims numbers settle down.
  • Producer prices fell by 0.2 percent in October. The Bureau of Labor Statistics also said that food prices at the wholesale level rose 0.5 percent led by pork prices, which were up 8.1 percent. This is the fifth straight month that producer prices of food have increased. In the past 12 months food prices are up 2.3 percent.
  • Consumer prices increased 0.1 percent in October. Energy prices, because of a drop in gasoline and natural gas prices, fell 0.2 percent while consumer food prices rose 0.2 percent, which left the so-called "core" prices up 0.2 percent.
  • Regional manufacturing activity took a hit in November with the New York Federal Reserve's manufacturing survey showing a minus 5.2 (vs. minus 6.2 in October) while the Philadelphia Fed's tumbled to minus 10.7 from plus 5.7 in October. Again, it is important to note that the region covered by these two Fed banks is where Sandy wreaked the most havoc.
  • Industrial production at factories, mines and utilities fell 0.4 percent in October. The consensus forecast had been for a 0.2 percent increase. Damage caused by Hurricane Sandy was blamed for the decline. Factory production dropped by 0.9 percent. The Federal Reserve also reported that the 0.4 percent September Industrial Production was revised down to 0.2 percent. Capacity utilization fell to 77.8 percent in October from 78.3 percent in September.
  • The housing market continued to improve with a report from the Mortgage Bankers Association stating that mortgage delinquencies dropped to 7.4 percent in the third quarter from 7.58 percent in the second quarter. Foreclosures also dropped to 4.07 percent from 4.26 percent for the same time periods. The National Association of Realtors said that existing home sales rose 2.1 percent in October to an annual rate of 4.79 million. The National Association of Home Builders Index jumped 5 points to 46, its highest level since May 2006. A score of 50 means half the builders say business is poor and half say it is good. Building supply purveyor Home Depot announced they are beginning to see the effects of a real estate revival, which drove increases in the firm's quarterly sales and profits. On the negative side, the Federal Housing Administration, which for almost eight decades was one government department that actually made a profit, will be appealing for an infusion of funds from the U.S. Treasury due to losses from defaulted mortgages.
  • Gallup's poll measuring consumers' economic confidence was up in November but continued to show a highly divided nation. The survey done November 9-11 had Democrats scoring +36 while Independents scored -17 and Republicans a -58.

Foodservice News This Week

  • Another problem, courtesy of Sandy, for East Coast restaurants is the lack of phone service. Operators that have lost land line service are trying to use their websites and cell phone numbers to let their customers know they're open and to make reservations but most are sure that the lack of service is costing them business.
  • The growth of fast-casual restaurants continues as Technomic reports the top 150 chains in the segment added more than 17,000 in 2011. This is a 5.2 percent increase.
  • Consumers support nutritional disclosure at restaurants. Technomic found 65 percent of those surveyed want nutritional labeling with the strongest demand for info on calories and sodium content. Of course, consumers frequently request something but it will be interesting to see how many people actually make use of the data.
  • Dining out on Thanksgiving is an increasing trend with the National Restaurant Association estimating that 30 million Americans will either eat out or dine on takeout food on the holiday. For many years finding a restaurant that was even open on Thanksgiving was difficult but there seems to be more operators planning special menus around the traditional turkey dinner.
  • A nine-course truffle dinner for four is being offered by Philadelphia's Le Castagne for $26,000. The press release didn't mention if they are open Thanksgiving.
  • The Euro Zone economy contracted in the third quarter, creating a drag on U.S. firms that are heavily committed to Europe like McDonald's.
  • The Upper Crust gourmet pizza chain closed most of their restaurants and discharged their employees after the company's executives allegedly paid themselves a month's salary in advance. The cult status operator had been charged with underpaying employees and owes $850,000 in back wages and damages.
  • Standex International reported their foodservice equipment sales increased by 4.9 percent in the company's most recent fiscal quarter.
  • Growth Chains: Burger 21 has signed franchise agreements for one new restaurant in Charlotte, N.C. and four in Virginia and Maryland. Dunkin' Donuts has franchise agreements to open 11 new stores in Green Bay and Milwaukee, Wis. and 10 stores in Grand Rapids, Mich. C-store chain Wawa plans on adding 30 new operations in five New Jersey counties.
  • Comparable Stores Sales Reports: Bob Evans (up 1.0 percent), Einstein Noah Restaurant Group (up 0.2 percent), Fiesta Restaurant Group (Pollo Tropical up 7.0 percent and Taco Cabana up 1.8 percent), Jack in the Box (system up 3.1 percent, company owned up 3.1 percent, and franchised up 3.0 percent), Mimi's CafĂ© (down 5.6 percent), and Qdoba (system up 0.4 percent, company up 0.8 percent and franchised locations were flat).

For complete details and information on other chains, click here for the Green Sheet.

Equipment Supplier Financial Data: Report this week for Standex International. Click here for the complete report.

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