Starbucks Passes Subway In Largest Chain Report, Leading Economic Indicators Positive Overall and Much More

There’s a new #2 in restaurant sales. A New York City startup company wants to streamline foodservice delivery by running their own central kitchen. See why Starbucks' plan to reduce energy use didn’t work. These stories and a whole lot more in This Week In Foodservice.

Foodservice Industry Equipment Suppliers Financial Reports indicate pretty good performance. FES has identified 10 publically held companies in the foodservice field. They are Cintas, Ecolab, Illinois Tool Works, International Paper Company, Libbey, Inc., Manitowoc Co., Middleby Corporation, Newell Rubermaid, Standex International and Sysco. It is important to note that most of them are in other businesses than foodservice so their financial statements may or may not reflect foodservice performance. An examination of their last quarterly reports shows a mixed sales picture with 6 companies reporting increased sales while 4 were down from the corresponding quarter the previous year. However, 3 of the 4 firms with sales declines were down less than 2 percent. Manitowoc reported a 6 percent decline in sales but their quarterly report shows foodservice sales were up 2.6 percent. (Manitowoc’s crane division pulled down total company sales.) All of the companies were profitable, and 7 of the firms reported increased profits. The leader in this area was Libbey with profits up 112 percent.

To obtain a copy of the Equipment Supplier Financial Data Sheet, please click here.

Economic News This Week

  • Fourth quarter 2014 Gross Domestic Product grew 2.2 percent according to the third estimate from the Bureau of Economic Analysis. Forecasters were looking for a bounce up to 2.4 percent. The bottom line is the last quarter of the year was a slow growth period and revisions are not going to change that.
  • Initial jobless claims fell by 9,000 to 282,000 for the week ending March 21. The 4-week moving average of claims fell 7,750 to 297,000. These are considered good levels and indicate a reasonably healthy job picture.
  • Consumers earned more but spent less in February. The Commerce Department reported that after tax, current-dollar disposable personal income rose 0.4 percent in February following a similar increase in January and a 0.3 percent increase in December. But real consumer spending, adjusted for price changes, fell 0.1 percent in February following a 0.2 percent increase in January. So what have consumers been doing with their money?  Saving it. The personal saving rate (as a percent of disposable income) rose 4.9 percent in December, 5.5 percent in January, and was 5.8 percent in February.
  • The Consumer Price Index rose 0.2 percent in February, marking the first increase in the index in 4 months. Seasonally adjusted core consumer prices — without food or energy prices — also rose 0.2 percent. Food prices increased 0.2 percent in February and have increased 3 percent in the last 12 months on an unadjusted basis. Food away from home data is shown in the Foodservice section below.
  • Sales of new homes jumped unexpectedly in February to a seasonally adjusted annual rate of 539,000, which is a 7-year high. Sales were up 7.8 percent over January and 24.8 percent over February 2014.
  • The Commerce Department’s Advance Report On Manufactured Durable Goods Orders found  new orders in February declined by 1.4 percent. Excluding the transportation segment, orders were down 0.4 percent. Excluding defense spending, orders were down 1 percent. Nondefense new orders for capital goods – those products used to make other goods – fell by 2.6 percent. Shipments and unfilled orders were also down.
  • The Gallup Poll’s Self-Reported Daily Consumer Spending Study for February found consumers spending about $81 a day, virtually identical to the $82 spent in January. However, this was down moderately from the $87 per day spending reported for February 2014.
  • Small business optimism is improving. The National Federation of Independent Businesses reported that their Optimism Index in February rose 0.1 percent to 98.0, which is the Index’s long-term average. The employment picture for small businesses was particularly encouraging.
  • The Gallup Poll’s US Economic Confidence Index continues to show consumers are about evenly split over the strength of the economy. The Index dropped to minus 3 for the week ending March 22 falling from plus 1 the week before. The Index has been straddling the zero mark throughout 2015.
  • The Reuters/University of Michigan Consumer Sentiment Index fell to 93 in March, down from 95.4 in February. However, the Index was up from the preliminary March reading of 91.2 and also was higher than the forecast of 92.

Foodservice News This Week 

  • Technomic’s 500 Largest Restaurant Chains Report revealed a collective 4 percent sales growth last year. But, there is a new #2. Starbucks, riding an 8.2 percent sales increase, passed Subway, which suffered a 3.3 percent sales loss in 2014. Another interesting fact was that the top 5 brands together grew at just 0.3 percent. It is not just lonely at the top but tough, too.
  • Maple, an NYC-based prepared meals delivery company, has received $22 million from a variety of investors. The startup operation will open their own kitchen and hopes to capitalize on building “a business entirely around delivery and (to) own every step of the process.”
  • Starbucks goal of cutting energy consumption ran into the chain’s goal of selling more food. The company invested in store design along with energy-efficient equipment and lighting but refrigeration and heating costs for the chain’s sandwiches and pastries took their toll. Instead, energy costs fell by 4.6 percent rather than the 25 percent reduction the company was seeking.
  • Food away from home prices rose in February by 0.3 percent, according to the Bureau of Labor Statistics’ Consumer Price Index. In the last 12 months food away from home prices have risen 3.1 percent, slightly more than grocery food prices at 2.9 percent. In the last 12 months the Consumer Price Index for all items is flat.
  • Fresh & Easy commits heavily to foodservice aiming to become “the only fresh food convenience store.” Fresh & Easy has offered prepared foods since the chain’s inception, but the new owners are putting even more emphasis on prepared food and beverages including a hot food bar, made to order sandwiches and pizza as well as extensive beverage service. The company had previously announced the closing of 50 existing stores.
  • Corporate Stirrings: Chipotle Mexican Grill was among stocks that one financial website thinks should seriously consider splitting their stocks. Chipotle shares have been selling well over $600.
  • Growth Chains: Paramount Fine Foods, a Canadian fast-casual Middle Eastern cuisine restaurant chain, plans to open 8 locations in Central Florida by late 2016 or early 2017. BURGERFi announced their first international development with a contract for 40 restaurants in Mexico City over the next 5 to 7 years. Another Broken Egg Café has signed a 5-store development agreement for Tennessee. Persona Wood Fired Pizzeria has a development agreement for a restaurant in 3 states, North Carolina, South Carolina, and Georgia. Gigi’s Cupcakes growth strategy calls for opening 25 new restaurants this year.
  • Comparable Store Sales Reports: NPC International down 3.5 percent and Sonic Drive Ins (system up 11.5 percent, company-owned up 11.2 percent and franchised up 11.5 percent.).

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

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