Published on Tuesday, 06 May 2014
Written by Jerry Stiegler
Lots to cover this week, including good news about April employment but some disappointing news about the economy. We also look at Sysco’s performance, comparable sales reports from 14 chains and a whole lot more.
The National Restaurant Association’s Restaurant Performance Index took a nice step up in March rising 0.9 percent from February to 101.4. This is the 13th straight month the index has exceeded 100, which indicates a period of expansion for the restaurant industry.
Driving the overall index was the Current Situation Index which advanced 1.5 percent to 100.8. This index had been below 100 in December, January and February. Operators reported that both same-store sales and traffic improved in March. And, the Expectations Index increased 0.3 percent to a level of 102, indicating that operators are increasingly optimistic about the future.
The improving results were reflected in the foodservice operators’ willingness to spend money as well. For March, 49 percent of those surveyed said they had made a capital expenditure for equipment, expansion and/or remodeling in the last 3 months vs. the 44 percent who reported they had done so in February’s report. As for their intention to invest in the next 6 months, 58 percent indicated they planned on making capital expenditures in the next 6 months. This is the same percentage as last month.
Overall, the National Restaurant Association has given a reasonably positive report that hopefully points to a decent year.
Economic News This Week
- Gross domestic product posted a small gain in the first quarter. The U.S. Department of Commerce’s first estimate showed GDP rose just 0.1 percent In January through March. Economists had predicted a bad quarter but not that bad. Since the recession ended, GDP had been increasing at a slow but steady rate of 2 percent. Consumer spending rose 3 percent in the first 3 months but energy expenses and healthcare expenditures accounted for most of the increase. Spending for consumer goods was up just 0.4 percent while business spending and exports both declined.
- ADP’s National Employment Report stated the U.S. added 220,000 private sector jobs in April. Small businesses, firms with less than 50 employees, accounted for 82,000 of the new jobs. Medium businesses, those companies with 50 to 499 employees, added 81,000 new employees. Large companies added 57,000 jobs, according to ADP. An ADP spokesman pointed out the increase is well above the 12-month average.
- First-time jobless claims for the week ending April 26 totaled 344,000, an increase of 14,000 — which surprised most experts. This marks the second consecutive week with a substantial increase in weekly claims. The less volatile 4-week moving average was 320,000, an increase of 3,000.
- The Bureau of Labor Statistics reported 288,000 new jobs were added during March. The private sector added 273,000 jobs and the government added 15,000. This is the best report on job creation since January 2012 and the second best month since 2009.
- April’s unemployment level hit 6.3 percent, down 0.4 percent from March. The bad news was that the decline was essentially the result of 806,000 people dropping out of the labor force. The labor force participation rate was 62.8 percent, the lowest rate in 30 years. Other troubling news included the fact that the long-term unemployed make up 35 percent of those out of work, the number of part-time workers who want full-time jobs remains high, and younger workers still have high unemployment.
- The average U.S. retirement age stands at 62, the highest it has been since The Gallup Organization started tracking this data in 1991. Non-retired Americans expect to retire at age 66. Obviously the longer people work, the longer the job cannot be filled by another worker.
- The Gallup Organization reports 30 percent of those surveyed believe quality jobs are available. This is up from just 8 percent in 2011. In contrast, Gallup also points out that 66 percent of Americans don’t think it is a good time to look for a quality job.
- Personal income increased 0.5 percent in March while personal spending increased 0.6 percent.
- The Institute for Supply Management’s Manufacturing Index advanced to 54.9 in April from 53.7 in March, marking the 11th straight month of expansion. New orders were stable, production was down 0.2 from March but still positive while employment increased 3.6 points.
- Thanks to growth in new orders and production, the Chicago Purchasing Managers’ Index leapt to 62 in April from 55.9 in March — the fastest growth in 6 months. Any number over 50 shows increased manufacturing activity.
- March durable goods orders increased 2.9 percent while shipments rose 1.2 percent. Unfilled orders increased 0.6 percent.
- March construction spending increased 0.2 percent over February but was up 8.4 percent over March 2013. Residential Construction was up 0.7 percent vs. February and 15.2 percent from March 2013.
- April car and light truck sales jumped to an annualized rate of more than 16 million units. Pickup trucks and small SUV sales were strong with several auto manufacturers experiencing double-digit sales growth.
- Consumer confidence declined in April, according to the Conference Board. The organization’s Consumer Confidence Index dropped to 82.3 from 83.9 in April. The decline was largely due to consumers’ less than enthusiastic perception of the current economic climate. Also, the Gallup Organization’s U.S. Economic Confidence Index dropped to minus 17 for the week ending April 27. In the previous 4 weeks the index had been running minus 15 or minus 16.
Foodservice News This Week
- Foodservice added 32,600 new jobs in April, roughly 12 percent of the total private sector jobs created in the U.S. last month and more than the 28,000 monthly industry hiring average for the last 12 months.
- Sysco’s sales increased 3.2 percent for the company’s third fiscal quarter ending March 29. Acquisitions accounted for 0.8 percent of the $11.3 billion in sales while currency exchange rates reduced sales by 0.9 percent. Sysco calculated food cost inflation at 0.9 percent and said case sales were up 3 percent.
- A look at Taco Bell’s breakfast program provides some interesting stats. Taco Bell executives said the chain needs to have breakfast sales average $100,000 per unit to have the “economics work.” Scott Hume, publisher and editor of Burger Business noted that Taco Bell set the bar pretty low since $100,000 in incremental sales translates into about 7 percent of average unit sales, which in turn means daily breakfast sales of $274. Hume goes on to point out that Wendy’s folded its breakfast program when the restaurant chain couldn’t reach its sales goal of $140,000 to $150,000 per store. Further, McDonald’s average unit does about $650,000 in breakfast business annually or 25 percent of each store’s annual sales. Hardee’s does 45 percent of its sales at breakfast and Jack in the Box 22 percent. Of course, Taco Bell may be sandbagging and expects breakfast sales to run much higher.
- Yogurt Mountain founder David Kahn has launched a new fast-casual pizza chain: Pizza 120. Customers build their own pizza by walking through a line selecting crust, sauce and toppings. The pizza then bakes for 120 seconds in an Italian-made oven. The first unit will open in a month or two and three more are to follow with franchising somewhere in the future.
- Manitowoc’s foodservice equipment sales rose 9.3 percent in the first quarter of this year.
- Standex International reported sales for the company’s foodservice equipment group increased 2.6 percent in the last fiscal quarter.
- Corporate Stirrings: Red Robin purchased 32 restaurants from its franchisees. The Portillo Restaurant Group is looking for potential buyers for the chain due to the owner and founder’s plans to retire.
- Growth Chains: Menchie’s opened its 400th location and has another 500 in its development pipeline. Good Times Burgers opened two new stores and is negotiating lease terms for a third. Moe’s Southwestern Grill will open approximately 100 new locations this year with the goal of having 850 units by the end of 2015. White Castle plans to enter the Canadian market “soon.” Teriyaki Madness plans to open 100 new restaurants by 2016. Domino’s celebrated the opening of the company’s 11,000th location. Big Apple Bagel signed a master franchise agreement for a minimum of 30 units to open in 10 Middle Eastern countries in the next 10 years.
- Comparable Store Sales Reports: Applebee’s (down 0.5 percent), Bravo Brio Restaurant Group (overall down 4.8 percent, Bravo down 5.5 percent, and Brio down 4.4 percent), Dave & Buster’s (up 0.7 percent), Del Frisco’s Restaurant Group (system wide up 1.6 percent, Del Frisco’s up 5.1 percent, and Sullivan’s down 2.1 percent), Domino’s (system wide up 4.9 percent, company-owned locations up 1.5 percent, and franchised locations up 5.2 percent), Dunkin’ Donuts (up 1.2 percent), Einstein Noah Group (up 1.6 percent), Good Times Burgers (up 14.4 percent), Ignite Restaurant Group (system wide down 4.2 percent, Joe’s Crab Shack down 6 percent, Macaroni Grill down 4.1 percent, and Brick House Tavern up 10 percent), Noodles & Company (system wide down 1.6 percent, company-owned locations down 1.4 percent and franchised locations down 3.3 percent), Panera Bread (system wide up 0.1 percent, company-owned locations up 0.1 percent and franchised locations up 0.1 percent), Pizza Patron (up 9.0 percent), Texas Roadhouse (company-owned locations up 2.8 percent and franchised locations up 3.8 percent) and Wingstop (up 9.6 percent).
For details and the same-store sales of other chains, please click here for the Green Sheet.
Quarterly Financial Data is now available for the following foodsevice industry suppliers: Ecolab, Manitowoc, Standex International, and Sysco. Please click here for the Industry Supplier Financial Data