This Week in Foodservice: January Retail Sales Rise, RBI to Buy Popeyes, Food Away From Home Leads Consumer Price Index Increase and Whole Foods Intros Fast-Casual

Retail sales in the U.S. rose in January with restaurants outperforming most retail sectors. Popeyes Lousiana Kitchen will be purchased by Restaurant Brands International. The consumer price index for food was up in January with food away from home leading the way. Wendy’s investment in Arby’s pays off big. The Whole Foods grocery chain introduces a fast-casual restaurant concept. Starbucks tests ice cream. These stories and a whole lot more This Week In Foodservice.

Retail sales grew 0.4 percent in January from December, according to the U.S. Census Bureau’s advance estimate. From January of 2016 retail sales have increased 5.6 percent. Excluding motor vehicles and parts sales, total retail sales grew 0.8 percent from December and were up 5.3 percent over January 2016.

Restaurant and drinking places sales were up 1.4 percent from December and increased 5.6 percent from January last year.

The bad news was the advance estimate for December was revised downward to minus 1.1 percent from 0.8 percent. What will happen next month when the Census Bureau has a larger sample to work with remains to be seen, but, using the numbers we have now, there does not appear to be any reason to panic.

The usual limitations and cautions with this report apply. The advance data is based on a small sample which is subject to revision when there are more responses to the survey. Note the change in restaurant sales in December outlined above. The research is conducted only with restaurants and drinking places, which excludes 30 percent to 40 percent of the foodservice industry, including hotels, resorts, employee feeding, schools, colleges, healthcare, and military. Some of the statistics are adjusted for seasonal variations, holidays and weekends but not for menu price changes.

Economic News This Week

  • Initial jobless claims totaled 239,000, an increase of 5,000 for the week ending Feb. 11. The 4-week moving average increased by 500 for a total of 245,250. Jobless claims continue remain low.
  • The Producer Price Index for Final Demand increased 0.6 percent in January from December. The Index for Final Demand Goods increased 0.3 percent, with the index for foods rising 1.1 percent. Excluding foods and energy prices, prices for final demand goods were up 0.1 percent. The index for final demand services rose 0.9 percent from December.
  • The Consumer Price Index for January increased 0.6 percent compared to December levels. This was the largest monthly increase since February 2013. Half of the increase was the result of a rise in gasoline prices. In the past 12 months, the index for all items is up 2.5 percent. The core index (total prices less the volatile food and energy prices) increased 0.3 percent in January and is up 2.3 percent in the last 12 months. (For food prices in January, please see the Foodservice News This Week section below.)
  • Industrial production fell 0.3 percent in January after rising 0.6 percent in December. Manufacturing output rose 0.2 percent and mining rose 2.8 percent but the index for utilities fell 5.7 percent, largely because of unseasonably warm weather. The Federal Reserve also reported that Capacity Utilization for the industrial sector fell 0.3 percentage points in January to 75.3 percent, a rate that is 4.6 percentage points less than its long-run (1972-2016) average.
  • The Empire State Manufacturing Survey Index rose to its highest level in almost two years. The General Business Conditions Index shot up 12.2 percentage points for a reading of 18.7. The New Orders Index increased 10.4 percentage points for a total of 13.5. The Shipments Index totaled 18.2, an increase of 10.9 percentage points. The Unfilled Orders Index turned positive for the first time since 2011 with a January reading of +8.2, up from -1.7. Any reading that’s more than zero indicates expanding activity.
  • The Philadelphia Federal Reserve’s Manufacturing Survey jumped to 43.3 in February, up from 23.6 in January. (Any number that exceeds zero indicates expanding activity.) The New Orders Index increased 12 points and the Shipments Index increased 8 points. A Federal Reserve spokesman said the data indicates that the growth in regional manufacturing is broadening.
  • January housing starts totaled 1,246,000
  • The Conference Board’s Leading Economic Index increased 0.6 percent in February after growing by 0.5 percent in December and 0.2 percent in November. A spokesperson for the Conference Board said the increase was “broad based among the leading indicators” and indicates a positive economic outlook for the first half of this year.

 Foodservice News This Week

  • Restaurant Brands International agrees to buy Popeyes. The owner of Burger King and Tim Hortons announced a deal to buy the 2,600 unit Popeyes Louisiana Kitchen chain for $79 a share or approximately $1.8 billion. The press release said Popeyes would be managed independently.
  • The Consumer Price Index for Food increased 0.1 percent in January. This is the first increase in food prices since October 2106. The Index for Food at Home was unchanged from December but the Index for Food Away From Home increased by 0.4 percent, the largest jump in more than 6 months. In the past 12 months, Food at Home prices have fallen 1.9 percent while Food Away From Home prices are up 2.4 percent.
  • Wendy’s stake in Arby’s is Golden. Wendy’s held on to 18.5 percent of Arby’s when it sold the roast beef chain to Roark Capital Group in 2011. The value of the Arby’s investment was estimated to be about $30 million then. It is now worth $320 million and Wendy’s has received $100 million in dividends since 2012. Wendy’s management states that they do not have any immediate plans regarding Arby’s.
  • Whole Foods to add a fast-casual restaurant in one of the chain’s Atlanta-area stores. The upscale grocery chain has developed a Brazilian churrasco concept tentatively called The Roast. The restaurant will seat 48, feature digital ordering kiosks, and offer full bar service in the evening.
  • Starbucks will add ice cream to its menu at more than 100 stores. The giant coffee chain, which tested the product in its Seattle upscale Roastery concept, will offer espresso poured over ice cream in the 18 stores with Reserve bars. The story did not indicate if the new item will require the purchase of equipment.
  • Panera Bread Company will begin delivery service from eight Connecticut restaurants. The company said the delivery program will require hiring 150 additional staff. Panera plans to have delivery service in 40 percent of its restaurants by the end of 2017.
  • A Chick-fil-A restaurant in midtown Manhattan was closed by the New York City Board of Health and, according to the NY Post, some New Yorkers lost their minds. A Chick-fil-A spokesman said the closing was due to a paperwork issue.
  • Corporate Stirrings: Wendy’s sold 310 of its company-owned units to franchisees in the chain’s last fiscal quarter. This is in line with Wendy’s stated goal of reducing the company’s corporate stores to 5 percent of its total locations. Bloomin’ Brands plans to close 43 restaurants. The company did not state which restaurants would be closed or when the closings would happen. Management did say the company expects to incur charges of $16 million to $19 million related to the closings. The company also plans to open 40 to 50 locations this year.
  • Growth Chains: YUM! China Holdings plans to open 600 restaurants a year. Salad restaurant Salata has an agreement to open 35 locations in Southeast and Central Florida. Chipotle will open two restaurants in St. Tammany Parish, La. Marco’s Pizza plans to open 150 restaurants this year. Wendy’s plans to add 1,000 restaurants by 2020. Boston’s Restaurant & Sports Bar signed an eight-unit deal for Mexico by 2020.
  • Comparable Store Sales Reports: Bloomin’ Brands (combined down 3.5 percent, Outback down 4.8 percent, Carraba’s down 2.3 percent, Bonefish Grill down 1.9 percent and Fleming’s up 0.2 percent), Burger King up 1.8 percent, Potbelly Sandwich up 0.1 percent, Ruth’s Chris Steakhouse flat, Tim Hortons up 3.8 percent, and Wendy’s up 0.8 percent.

For details and same-store sales of other chains, refer to the Green Sheet.

 

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