The US Census Bureau’s advanced sales report for July put total retail sales at +0.6 percent which is slightly better than forecast. This is up +4.2 percent from July 2016 and now shows an increase of 3.9 percent for the first 7 months of this year.
The Bureau also revised June sales to +0.3 percent, a significant increase from the advanced report of down 0.1 percent.
Restaurant and drinking place sales rose 0.3 percent in July over the June report. This was on top of a +0.3 percent rise in June, which was a major revision from down 0.6 percent in the June advanced report.
Restaurant and bar sales were up 3.4 percent over July 2016 and are now up 3 percent in the first 7 months of the year.
If the results of the numbers in the June advanced report hold up, it would appear that restaurant sales are recovering somewhat and beating the performance shown in some private studies.
Like most studies of this type, there are some cautions and limitations. The Census Bureau labels the data as an “advanced” report as it is based on a small initial response. When a larger sample is analyzed, the findings maybe revised. The Census Bureau only surveys restaurants and drinking places. A significant part of the foodservice industry is not included. Not surveyed are hotels, motels, resorts, retailers (supermarkets, convenience stores, etc.), employee feeding, healthcare, colleges, schools (K-12) and military feeding. Some of the sales figures are adjusted holidays, weekends and other seasonal variations but the none of the data is adjusted for menu price changes.
Economic News This Week
- U.S. job openings rose to 6.2 million in June, an increase of 461,000 from May. This is a record high for job openings since the Bureau of Labor Statistics started the Job Openings and Labor Turnover Survey in 2000. The number of hires declined slightly from 5.4 million in May to 5.3 million in June. Total Separations were virtually the same in June as in May. The number of layoffs rose slightly and the number of quits fell slightly. Labor experts watch the number of quits carefully since it reflects worker confidence in either leaving for another job or leaving with confidence in finding another job.
- Initial jobless claims rose 3,000 to reach 244,000 in the week ending Aug. 5. The 4-week moving average fell by 1,000 to 241,000. This report continues to indicate a healthy jobs market.
- U.S. business productivity increased 0.9 percent in the second quarter. The Bureau of Labor Statistics reported that output increased 3.4 percent and hours worked increased 2.5 percent. Both are at a seasonally adjusted annual rate. Unit Labor Costs increased 0.6 percent in the second quarter as there was a 1.6 percent in hourly compensation and a 0.9 percent increase in productivity. However, in the last four quarters unit labor costs have declined by 0.2 percent.
- Consumers increased their borrowing in June by 3.9 percent on a seasonally adjusted annual basis. The Federal Reserve reported that revolving credit (mostly credit card debt) grew by 4.9 percent while non-revolving credit (auto loans, student loans, boat loans, etc.) increased by 3.5 percent.
- The Producer Price Index for Final Demand declined 0.1 percent in July on a seasonally adjusted basis. The index for final demand goods was down 0.1 percent and the index for final demand services was down 0.2 percent. The change in final demand is up 1.9 percent in the last 12 months. The index for food was flat.
- The Consumer Price Index rose 0.1 percent in July on a seasonally adjusted basis. In the 12 months ending in July the CPI is up 1.7 percent unadjusted. The U.S. Federal Reserve has a stated policy of keeping the inflation rate at 2.0 percent. (For July consumer prices of food, please see the Foodservice News This Week section below.)
- U.S. home prices continue to climb. The CoreLogic Index in June was up 6.7 percent from a year ago and up from 1.1 percent from May. Home prices have risen almost 50 percent since 2011. Driving the price increase is a lack of homes available for sale. Also, in some markets, home rental companies are gathering up available houses to put up for rent.
Foodservice News This Week
- Little Caesars will offer a new service called Reserve-N-Ready. Customers can order and pay for using the Little Caesars’ app then pick up their food from a heated, self-serve device called the Pizza Portal. Customers can skip the counter and go directly to the Pizza Portal, enter a code number and a door will open, giving them access to their order. According to the chain, the system has been tested and will roll out nationally in 2018.
- Harris Poll finds Millennials have higher than average brand equity for some restaurant segments. Millennials lean toward coffee, quick-serve, casual dining and chicken restaurants. Another finding was Baby Boomers have lower than average preference for pizza and fast casual Mexican. Coming out No. 1 in their respective categories were Five Guys (burgers), The Cheesecake Factory (casual dining), Chick-fil-A (chicken), Starbucks (coffee and quick service), Moe’s Southwestern Grill (fast casual Mexican), Papa John’s (pizza), and Subway (sandwich).
- Are Starbucks new stores cannibalizing older stores? BMO Capital Markets has studied Starbucks units that are 1 year old, 3 years old and 5 years old and concluded stores are eating into one another’s volume. Starbucks had 6,705 locations in the U.S. in 2011 and had 7,880 at the end of 2016. And, Starbuck’s comparable store sales are also trending lower. Comps that were +8.0 percent as recently as 2012 and +6.0 percent last year, are running at 4.0 percent so far this year.
- The Consumer Price Index for food rose 0.2 percent in July with the index for food at home and the index for food away from home both rising 0.2 percent. In the past 12 months, food-at-home prices have risen 0.3 percent while the index for food away from home increased 2.1 percent. Some observers feel that the gap between the prices at restaurants and grocery stores have had a negative impact on restaurant traffic.
- Rita’s Italian Ice to open test stores. Called Rita’s Italian Ice & Creamery, the new concept will feature a rotating menu of hand-scooped frozen custard alongside the company’s signature Italian ice. Baked items like cookies, brownies and waffles that can make sandwiches are also part of the lineup. The new stores will be introduced in “select markets.”
- Corporate Stirrings: Dine Equity will close more locations than they had originally stated. Between 105 and 135 Applebee’s will shut downs, which is up from the 40 to 60 closures originally announced. Also, 20 to 25 IHOP restaurants will close, up from the originally announced 18. The company stated it expects to open 125 new locations for the chains, mostly overseas. Landry’s won the Ignite Restaurant Group in a bankruptcy court auction with a bid of $55 million. KRG Acquisitions bid $50 million. Landry’s bought Joe’s Crab Shack in 1994 and sold it to J.C. Holdings LLC for $192 million in October 2006. It is believed that Landry’s will sell the other Ignite brand, Brick House Tavern.
- Growth Chains: First Watch plans on opening as many as 50 restaurants a year over the next several years and believes that they could eventually reach a total of 1,300 locations. Texas Roadhouse expects to open 27 to 29 restaurants this year. Boston’s Restaurant & Sports Bar has signed 22 new franchise agreements this year. McDonald’s plans to open 2,000 locations in China by 2022. Cold Stone Creamery has signed a market franchise agreement to open 20 stores in Malaysia in the next 5 years. A Captain D’s franchisee will open 9 restaurants in Central Florida. Tropical Smoothie Café plans to open 6 locations in Gwinnet County, Ga.
- Comparable Store Sales Reports: Applebee’s down 6.2 percent, Ark Restaurants up 0.4 percent, Brinker International (Chili’s company owned down 2.2, Chili’s franchised U.S. down 0.1 percent and Maggiano’s up 0.5 percent), Carrols Restaurant Group up 4.6 percent, Chuy’s down 1.0 percent, Fiesta Restaurant Group (Pollo Tropical down 7.7 percent and Taco Cabana down 4.5 percent), Foge De Chao up 0.5 percent, IHOP down 2.6 percent, J. Alexander’s Holdings (J. Alexander’s and Redland’s up 4.4 percent and Stony River Steakhouse up 2.5 percent), Jack in the Box (system down 0.2 percent, company owned down 1.6 percent and franchised up 0.1 percent), Jamba Inc. (system down 0.8 percent, company owned up 0.9 percent and franchised down 1.0 percent), Noodles & Company (system down 3.4 percent, company owned down 3.9 percent and franchised down 0.4 percent), Papa Murphy’s (domestic down 4.3 percent, company owned down 6.6 percent and franchised down 4.1 percent), Qdoba (system up 0.5 percent, company owned down 1.1 percent and franchised up 2.3 percent), Red Robin up 0.5 percent, and Wendy‘s up 3.2 percent.
For details and same-store sales of other chains, Please Click Here for the Green Sheet.