U.S. January retail sales slipped but restaurant sales started the year on a high note. Knapp-Track data shows casual restaurant chains did well in January, too. And the LA Times reported that minimum wage increases don’t force restaurants out of business but that other problems are created. These stories and more in This Week In Foodservice.
Total retail sales retreated 0.8 percent in January from December. Excluding revenues from automobiles and automobile parts, sales declined 0.9 percent for the month. However, compared to January of 2014 retail sales were up 3.3 percent. Contributing to the decline in dollar sales was a big drop in gasoline prices causing gas station prices to fall 23 percent.
Restaurant and bar sales were a different story with sales up 0.8 percent in January over December. Compared to January 2013, restaurants and drinking places saw sales rise an impressive 11.3 percent.
As we do every month here are the limitations to bear in mind when considering the data. The sales numbers are “advance” findings based on a limited sample size. They are subject to revision and are, in fact, frequently changed.
Economic News This Week
- Job openings rose slightly in December to 5 million, up from 4.8 million in November. The number of openings was the highest since January 2001. Both the rate of those quitting and the layoffs and discharge rates were statistically unchanged from November. This data is from the Bureau of Labor Statistics’ Job Opening and Labor Turnover Study (JOLTS).
- Are automobile loans a problem for the economy? While car sales have been a bright spot in the economic recovery there have been vague rumblings from time to time that part of the boom is the result of loose lending practices. The Wall Street Journal now reports federal and other government agencies have been in contact with a number of auto lenders as the situation has raised concerns similar to the mortgage debacle of the last decade.
- Home prices increased slightly in the fourth quarter of 2014 in most metropolitan areas in the country according to the National Association of Realtors. A spokesman for the association attributes the increase to low inventory, attractive interest rates and an improving job market.
- The Gallup Organization’s U.S. Economic Confidence Index remained steady at +3 for the week ending February 8. Since its inception seven years ago, the Index was in negative territory until this year.
- The final February reading for the Bloomberg/University of Michigan Consumer Index fell to 93.3 from the preliminary finding of 99.0. The current situation index dropped from 109.7 to 103.3 while the expectations index retreated from 91.0 to 87.5. The University of Michigan statement speculated that the recent increase in gasoline prices and horrible weather particularly in the Northeast dampened consumer confidence.
- The Gallup Organization’s Self-Reported Daily Consumer Spending study fell to $81 in January, down $17 per day from December. Gallup points out that consumers usually do spend less in the first few months of the year. Further, $81 is one of the highest self-reported averages in any January since 2008.
Foodservice News This Week
- Knapp-Track reports same-store sales for the approximate 60 casual chains that participate in Malcom Knapp’s study chalked up 5.4 percent comparable store growth in January. In 2014, January same-store sales declined 2.3 percent as a result of severe weather impacting much of the country, making this comparison not exactly ideal. And, the January 2015 traffic increase of 2.1 percent is going up against a minus 4.2 percent in 2014. The data also shows 3.3 percent increase in check average, the highest monthly check increase in 6 years. Knapp-Track data is provided courtesy of Bank of American Merrill Lynch.
- What really happens when minimum wages go up? According to an LA Times article, firms don’t go out of business and mass layoffs don’t occur. Instead, anecdotal evidence suggests that hours get cut and jobs eliminated. Some restaurant operators switched to lower price menu items. Several operators said that minimum wage increases “backfire” when workers make more money per hour but work fewer hours. And, since California’s minimum wage doesn’t distinguish between tipped and non-tipped employees, a big chunk of money goes to the servers who are among some of the highest paid workers in town.
- Full-service restaurants are trying to cash in on the success of fast-casual. Technomic says the list of full-service chains developing fast-casual concepts includes Cracker Barrel, HuHot Mongolian Grill (Hu-Hot Mongolian Express), Tony’s Restaurant (Tony’s AM – a breakfast and lunch concept), and Romano’s Macaroni Grill (Romano’s Kitchen Counter, a lunch concept in Romano’s standard restaurants.)
- Sysco executives met with FTC commissioners regarding the broadline distributor’s proposed acquisition of US Foods after FTC staffers indicated they might recommend a suit to block the deal. It is not clear if Sysco changed its proposed sale of 11 US Food’s operations to the Performance Food Group to gain approval from the FTC commissioners.
- China’s restaurant market grew 9.7 percent to $449 billion in 2014 according to the China Cuisine Association. The Association cited “strong demand for restaurants targeting mass consumers” for the increase. For comparison, the National Restaurant Association estimates U.S. restaurant sales at $475 billion last year.
- Corporate Stirrings: Trinity Capital has purchased Norm’s Restaurants, an 18-unit Southern California family dining chain. Altamont Capital Partners announced it had acquired Cotton Patch, LLC, a Southern food restaurant concept with 45 locations in the Southwest.
- Chipotle Mexican Grill has new a take-out only format which offers lower up front costs and will allow the chain to enter smaller markets.
- Growth Chains: Sonic plans to open more than 50 locations in Central Florida by 2022. The drive-in chain also opened its first restaurant in Rhode Island with more to come. Ritter Frozen Custard will open 10 units in Northern Texas. MOD Pizza plans to open six restaurants in Philadelphia this year. Dunkin’ Donuts will open 10 locations in Birmingham, Ala.
- Comparable Store Sales Reports: Ark Restaurants (down 1.8 percent), The Cheesecake Factory (up 1.4 percent), Good Times Burgers (up 8.0 percent), Panera Bread (system up 3.0 percent, company-owned up 3.3 percent, and franchised up 2.7 percent), Red Robin (up 3.3 percent), and Ruth’s Chris Steakhouse (up 5.0 percent).
For details and same-store sales of other chains, please click here for the Green Sheet.