February Sales Slide, Turnover Is Up and Sysco Postpones US Foods Acquisition

Restaurant sales slid in February, perhaps due to weather. Foodservice employee turnover continued to rise in 2014. Sysco notified the SEC that they are postponing the closing of the US Foods acquisition for 60 days.

February U.S. retail sales declined for the third straight month compared to the previous month. The Census Bureau advance reading for February projected total retail sales were down 0.6 percent vs. January. Excluding motor vehicles and parts, sales declined 0.1 percent. But compared to February 2014, sales were up 1.7 percent.

Unfortunately, restaurant and drinking place sales also dropped by 0.6 percent from January. However, restaurant and bars were up a strong 7.7 percent over February 2014. There were no definitive reasons for the decline but extremely bad weather in some parts of the country may have played a role.

There are limitations and cautions with the sales data. The report is based on a limited sample and “advance” numbers subject to revision. The survey covers just restaurants and bars and does not include other foodservice segments such as hotels, resorts, clubs, etc. or any of the so-called institutional segments such as healthcare, education, employee feeding, etc. The sales numbers are adjusted for seasonal variations, holidays and trading days but not for menu price adjustments.

Economic News This Week

  • Initial jobless claims fell by 36,000 to 289,000 for the week ending March 7. The 4-week moving average fell by 3,750 to 302,000. It appears that the steep increase in the number of claims filed over the previous weeks may have been a statistical fluke.
  • The Bureau of Labor Statistics JOLTS study for January disclosed job openings remained at a high level, in fact, the highest since January 2001. Hiring dropped in January while the number of job separations was unchanged from December. The “quits” rate was little changed from December. Labor experts watch the quits rate closely because it is believed that it shows that worker willingness to change jobs shows confidence in the economy. (The National Restaurant Association did an analysis of the restaurant and accommodation industry data contained in the JOLTS research and it can be found below in the Foodservice News This Week section of this newsletter.)
  • The Producer Price Index for February fell 0.5 percent with final demand goods down 0.4 percent and final demand services down 0.5 percent. Food prices dropped 1.6 percent while energy prices were flat. Without food and energy, final demand goods prices were down 0.1 percent.
  • Consumer’s increased borrowing in January by 4.2 percent. The Federal Reserve reported that non-revolving credit, auto loans, tuition loans, etc., rose by 6.2 percent while revolving loans, chiefly credit card debt, fell by 1.6 percent. This latter number would indicate that consumers remain cautious about spending.
  • The Bloomberg/University of Michigan Consumer Sentiment Index unexpectedly declined in March to 91.2 from 95.4 in February. University of Michigan spokesman attributed the decline in part to high home heating bills.

Foodservice News This Week

  • Restaurant and accommodations employee turnover rose for the fourth straight year in 2014 with a rate of 66.3 percent. The “quits” rate in the industry was 46.5 percent with layoffs and discharges accounting for 17.2 percent. The remaining 2.6 percent of turnover included retirements, deaths, etc. For comparison, the turnover rate for all private sector employees was 44.4 percent in 2014. The 2007 turnover rate — before the start of the great recession — for restaurant and accommodation workers was 80.9 percent.
  • Sysco has extended its agreement to acquire US Foods by 60 days. The deal was supposed to close by March 8 but Sysco notified US Foods and the U.S. Securities & Exchange Commission the date is May 7.
  • Universal Orlando Resort has been issued a building permit for a $7 million restaurant renovation project. No other details are available at this time.
  • The fifth year of the Temkin Experience Ratings found fast food chains performing very well with Chick-fil-A coming in fourth. (Number one was Publix Supermarket.) Also in the top 20 were Papa John’s, Dairy Queen, Panera Bread, Subway and Sonic.
  • The Top Ranked Pizza Chains, based on a consumer study by Market Force Information, are (in declining order) Papa Murphy’s, Pizza Ranch, Papa John’s, Domino’s, CiCi’s, Little Caesars, and Pizza Hut.
  • Corporate Stirrings: Romano’s Macaroni Grill has been sold by the Ignite Restaurant Group to Redrock Partners LLC for $8 million cash. Stockholders of The Pantry Inc., operators of over 1,500 C-stores in the U.S. voted to accept an offer to be acquired by Couche-Tard, a Quebec based chain that operates more 6,300 C-stores in North America. RJC, LLC has purchased 26 Denny’s Restaurants with an $11 million loan from GE Capital’s Franchise Finance. Del Taco and the Levy Acquisition Corp. have announced they have entered into a merger agreement based on a $500 million value for Del Taco.
  • Growth Chains: Marco’s Pizza plans to open 30 locations in the Atlanta Area. Burger King will almost double the number of their restaurants to 60 in South Africa by mid-year with possibly 200 to 250 in 2 years. MOD Pizza, currently with 32 locations, plans to have 100 restaurants by the end of 2015. Habit Burger will open 25 to 28 company owned units and 2 to 5 franchised units this year. Taco John’s has signed agreements with various franchisees that will result in the addition of 25 new stores. Fazoli’s has signed a development agreement for 6 new restaurants in Georgia. Rita’s Italian Ice has plans to open at least 60 locations in New Mexico and Southern Colorado in the next 5 years.
  • Comparable Store Sales Reports: Casey’s General Store up 14.1 percent, El Pollo Loco (system up 7.6 percent, company-owned up 6.4 percent, and franchised up 8.6 percent), Fazoli’s (franchised up 5.5 percent), Frisch’s up 4.8 percent, Habit Burger up 13.2 percent. Ignite Restaurant Group (Joe’s Crab Shack down 4.5 percent, Macaroni Grill down 2.8 percent, and Brick House Tavern up 5.7 percent), Jamba, Inc. (system up 4.9 percent, company-owned up 4.2 percent, and franchised up 5.4 percent), Krispy Kreme up 3.6 percent, Logan’s Roadhouse up 0.1 percent, Shake Shack up 7.2 percent, and Zoe’s Kitchen up 7.8 percent.

For details and same-store sales of other chains, please click here for the Green Sheet.

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