Although overall retail sales in the U.S. declined 0.4 percent in March, the restaurant and bar segment posted a solid 4.3 percent increase.
The U.S. Census Bureau's advance March sales report found a 0.4 percent decrease in total retail sales on an adjusted basis compared to February. Sales were down in most product categories as well although total sales for last month were up 2.8 percent compared to March 2012.
The good news is that restaurant and bar sales outperformed the retail market as a whole with adjusted sales increasing by 0.7 percent compared to February. Sales for March of this year increased 4.3 percent over March 2012. With menu price inflation projected to run up 2.5 percent to 3.5 percent, the restaurant industry should be experiencing some real growth.
A look at this year's data shows how important adjusting sales data for weekends and holidays can be. On an adjusted basis restaurant sales were up a whopping 14.8 percent over March last year but March 2013 had 5 weekends plus Easter, which generates a variety of dining out occasions including many brunches.
View the government sales data with some limitations in mind. The sales statistics are not adjusted for inflation and cover only restaurants and drinking places. Most foodservice segments are not included in the study.
Economic News This Week:
- Initial jobless claims fell by 42,000 to 346,000 for the week ending April 6. The previous week claims hit 388,000, a 4-month high. The less volatile 4-week average stands at 358,000. First-time claims have been in this range most weeks so far in 2013. Some experts looking at this data see the job picture improving, but very slowly.
- Cheap money has paid off for many companies but not for job seekers. A survey of 450 CFOs by Duke University and CFO Magazine found that 202 of the firms had borrowed money because of low interest rates. Half spent on capital investment with 27 percent spending on mergers/acquisitions while 25 percent expanded their domestic operations. Others used the funds to increase cash (14 percent), buy their own stock back (13 percent), expand overseas operations (12 percent), and/or increase their dividend (12 percent). Only 10 percent of the respondents said they increased their hiring.
- The Producer Price Index in March fell 0.6 percent primarily because of a decline in energy prices. So called core inflation, which excludes food and energy prices, rose just 0.2 percent and that prompted one observer describe producer prices as tame.
- World food prices rose in March with the Food & Agriculture Organization's Index rising 1 percent. World food prices have hit record highs but had eased a bit at the end of last year. Now the FAO reports prices have been moving higher the last two months.
- The Federal Reserve System's minutes show some members questioning the current policies but not enough discontent to make any immediate changes. Thus, it appears that the Fed will keep interest rates low for the rest of this year.
- Consumer confidence dipped in April, according to the preliminary results of the Reuters/University of Michigan Consumer Index. The index read 72.3, which is down from March's final rate of 78.6. The current situation index fell from 90.7 in March to 84.8 while the expectations index fell from 70.8 to 64.2. Meanwhile The Gallup Organization's U.S. Economic Confidence Index rose to minus 13 for the week ending April 7, up slightly from minus 16 the week before. As Gallup reminds us, this index has never been in positive territory since its inception in 2008.
Foodservice News This Week:
- While they may have taken their lumps from fast-casual operations in the past few years, new research from Technomic shows that casual dining operations have an edge in some important areas. Consumers see fast-casual style restaurants as offering good value, low prices, and fast service but casual-dining restaurants have an edge on food quality, number of menu items, enjoyable dining experience and good service.
- Adult restaurant visits increased in 2012 but the kids are staying home. The NPD Group reported that adult only parties' visits grew by 1.0 percent last year, which was the first increase in 4 years. However, visits by parties with children stayed flat. Parties with children accounted for 32 percent of all visits, which accounts for 15 billion visits and $84 billion in sales. In the burger segment kids account for 5 billion visits and $22 billion in sales.
- McDonald's figured in several news stories this past week. The Wall Street Journal reported on a leaked webcast with franchise owners during which McDonald's executive Steve Levigne reported that one in five customer complaints were due to the fact employees are rude and service is slow. One slide in the presentation said "Service is Broken." McD's is now rolling out a new ordering system that they feel will solve at least some of their problems. A second Journal article dealing with McDonald's emphasis on their Dollar Menu says that some analysts look at the chain as indicator of the economy in general and the overall health of the restaurant industry. The story says "To put it simply, if McDonald's can't sell a $1 cheeseburger, that doesn't bode well for the rest of the industry." McDonald's financial report for the first quarter comes out Friday.
- Convenience store sales hit $700 billion last year according to the National Association of Convenience Stores. Motor fuels account for 71.5 percent of overall sales but only 35 percent of profits. With cigarette sales declining, it is pretty obvious why many C-stores are looking to expanding their foodservice operations. NACS says that prepared and commissary food; hot, cold and dispensed beverages accounted for 15.8 percent of in store sales in 2012.
- Food trucks made news in Cincinnati. Mr. Hanton's Handwiches, a food truck offering about 30 different hotdog options, will be opening a bricks and mortar restaurant next month with a similar menu. And, the owners of the Catch-A-Fire Pizza truck have struck a deal with several microbreweries in the area to bring the truck to joint events. The breweries have tap rooms but don't serve food.
- Growth chains: CKE has opened their 500th international location, a Carl's Jr. in St. Petersburg, Russia, and has stated the chain's intention to double the number of restaurants outside the U.S. in the next 5 years. Five Pies Pizza Co. has signed a franchise agreement that will bring 10 stores to the Kansas City area. Subway plans to open 20 restaurants in Kenya over the next 7 years. Zaxby's, a chicken chain, opened 30 new units last year and plans to open 36 more this year. Zaxby's plans to add 150 locations in 2014 and 2015. Coldstone Creamery will open 4 stores in the next 4 years in Bangladesh and 15 in the Philippines over the next 5 years. Dunkin' Donuts, with 85 percent of their current U.S. stores on or near the East Coast, has announced a major effort to establish their brand in California with a plan for 150 stores in the southern part of the state with an eventual goal of 1,000 stores through out the state. McDonald's has announced they plan to open 30 restaurants in Malaysia. McDonald's has also announced the investment of 110 million Euros to add 40 more locations in France.
- Comparable Store Sales Report: Frisch's (down 0.9 percent), Good Times Burgers (up 3.9 percent), and Ruby Tuesday (company owned down 2.8 percent and franchised down 1.7 percent.)
For full details and comparable store sales of other chains, click here for the Green Sheet.