U.S. retail sales increased 0.1 percent in February, according to the advance estimate from the Census Bureau. While in line with forecasts, this result was still disappointing. February sales increased 5.7 percent from February 2016. Retail sales for January were revised upwards from 0.4 percent to 0.6 percent. For the first 2 months of this year retail sales are up 3.7 percent over the same period in 2016.
February restaurant and drinking place sales dipped by 0.1 percent from January but showed an increase of 3.7 percent compared to February 2016. For the first 2 months of the year, restaurant and bar sales are up 3.7 percent compared to the first 2 months of 2016. The Census Bureau revised January restaurant sales up from 1.4 percent to 1.7 percent over December.
How do the government numbers stack up to other sales estimates? The Census Bureau attempts to measure total sales in dollars for the month while some others measure comparable sales data but exclude restaurants that have opened recently. Note: comparable store sales, sometimes called same-store sales, are not generally accepted accounting principles (GAAP) numbers and any operation could choose to have their “comps” use a couple of months or up to over a year. Nor does the Census Bureau measure traffic. Reduced traffic or number of visits may not directly result in a similar drop in sales because those customers who continue to patronize restaurants are bigger spenders who drive up the check average.
Not too many folks claim that foodservice is doing great but the Census Bureau research seems to indicate that talk of a restaurant recession may be overstated.
There are some limitations and cautions about this data. The numbers are described as “advance” since they are based on a limited sample and as such can be and frequently are revised. The sales data is for restaurants and bars only. The Census Bureau does not survey hotels, resorts, clubs, employee feeding, healthcare, schools and colleges, and military feeding. Some sales statistics are adjusted for calendar changes, holidays, and weekends but not for menu price changes.
Economic News This Week
- Small business optimism remained high in February, according to the National Federation of Independent Business. The Small Business Optimism Index fell 0.6 points for a final reading of 105.3. Despite the dip this represents one of the highest readings in the 43 years Federation has done the study. A Federation spokesman noted the index has scored more than 105 for 3 straight months.
- Initial jobless claims declined by 2,000 for a reading of 241,000 for the week ending March 11. The 4-week moving average fell by 750 for a final reading of 237,250.
- The March Empire State Manufacturing Survey showed business activity growing “at a solid clip.” The overall index edged down 2 points for a reading of 16.4 but any number that exceeds zero shows increasing activity. The New Orders Index climbed to 21.3, its highest level in several years. The Shipments Index edged down to 11.3. The Unfilled Orders Index rose to 14.2, its highest level in more than a decade. The Employment Index rose to 8.8 and the Average Work Week Index rose to 15. Thus, the New York Federal Reserve reports a very rosy picture for manufacturing in the New York region.
- The March Philadelphia Manufacturing Business Outlook Survey indicates continuing expansion. The index for manufacturing activity in the region decreased from 43.3 in February to 32.8 this month showing continued manufacturing growth but at a slower rate. (Any reading of more than zero shows increased activity.) The New Orders index rose one point and the Shipments Index rose 4 points. The Unfilled Orders Index was positive. The Employment Index rose 6 points while the Average Work Week Index increased 5 points.
- The Producer Price Index for Final Demand increased 0.3 percent in February on a seasonally adjusted basis. Without food and energy prices, the index increased 0.1 percent. On an unadjusted basis, the final demand index rose 2.2 percent in the 12 months ending in February. The index for final demand goods rose 0.3 percent and the index for final demand services was up 0.4 percent.
- The Consumer Price Index increased 0.1 percent in February on a seasonally adjusted basis. In the past 12 months ending in February the index increased 2.7 percent unadjusted. Without food and energy prices the index increased 0.2 percent in February and was up 2.2 percent in the last 12 months.
- February Industrial Production remained unchanged from January. The Federal Reserve reported that manufacturing output rose 0.5 percent and mining output increased 1.8 percent but utilities index fell 7 percent due mostly to unseasonably warm weather. Capacity Utilization fell 0.1 percent for a reading of 75.4 percent, a rate 4.5 percentage points less than the long run (1972-2016) average.
- February housing starts increased 3 percent compared to January and were up 6.2 percent above February 2016. Single-family housing starts in January were 6.2 percent above January starts. The number of Building Permitsissued in February fell 6.2 percent from January but were up 4.4 percent from February 2016. Single-family permits issued were up 3.1 percent from January.
- The Conference Board’s Leading Economic Index increased 0.6 percent in February, marking the sixth straight month the index is up. The LEI is now 126.2, the highest it has been in a decade. A Conference Board spokesman stated that economic growth should remain moderate for the next six months.
- The University of Michigan Index of Consumer Sentiment remains “quite favorable.” The preliminary March Index 97.6 or 1.3 points more than February. The Current Economic Conditions Index increased 3 points for a reading of 114.5, while the Index of Consumer Expectations increased 0.1 points for a final reading of 86.7.
- The Consumer Price Index for Food increased 0.2 percent in February on a seasonally adjusted basis. This is the largest increase since September 2015.
Foodservice News This Week
- Tim Horton’s franchisees have reportedly formed a group to protest cost cutting moves by Restaurant Brands International. The Great White North Franchisee Association states its members have to use inferior products such as coffee carafes, mugs, lids and trays that hurt the Tim Horton’s brand and make it hard for the franchisees to make money. A spokesman for Restaurant Brands denied any friction between the corporation and its franchisees.
- Legal Sea Foods will introduce a fast-casual concept. Known as Legal Fish Bowl, the new operation will offer six “signature” bowls based on the current menu offering of Legal Sea Foods. The company wants to appeal to time-strapped customers.
- Panera Bread Company will offer delivery service in Nashville. The company will run the service even though two third-party delivery companies currently operate in Nashville. Panera had previously announced plans to have delivery service available from 35 percent to 40 percent of its locations by the end of this year.
- Corporate Stirrings: Ruby Tuesday announced the company would consider a sale or merger. The chain has undergone some rough times including declining sales for the last four years. Longtime Wendy’s franchisee Larry Fleming sold his 38 restaurants to Conti Foods. The Wendy’s are located in Kansas, Oklahoma and Texas. Conti is headquartered in Irvine, Calif., and plans to open offices in Tulsa, Okla., and Wichita, Kan. The price of the deal was not announced. Ignite Restaurant Group, parent of Joe’s Crab Shack and Brick House Tavern, has been notified that the company’s stock will be delisted on the NASDQ exchange. The news article did not give a reason for the delisting nor did Ignite have any comment.
- Growth Chains: Sovrano LLC plans “aggressive expansion” for its Mr. Gatti’s (table service restaurant) and Gatti’s Pizza (buffet-style) concepts. Papa John’s has 100 restaurants in Russia and plans on adding 50 more this year. Bad Daddy’s Burger Bar has three restaurants under construction and plans to have three more under construction by June of this year. Dickey’s Barbecue Pit will open two restaurants in California. Wahlburgers will open two restaurants in New Orleans and two in the Pittsburgh area. Tropical Smoothie Café will open four locations in Idaho. Texas Chicken’s Oman franchisee has opened the first of five planned cafes in that country.
- Comparable Store Sales: Arcos Dorados up 16.4 percent. Fogo De Chao down 1.0 percent, Jamba Inc. (system down 2.2 percent, company-owned down 2.5 percent, and franchised down 2.2 percent), Papa Murphy’s (domestic down 7.8 percent, company-owned down 11.1 percent, and franchised down 7.5 percent), and Ruby Tuesday down 4.0 percent.
For detail and same-store sales of other chains, please click here for the Green Sheet.