Rounding up Chipotle news from the past week. Foodservice employment surged in January. Wendy’s pledges to cut energy usage by 20 percent. Furniture retailer Ikea becomes a destination restaurant and much more!
Chipotle Mexican Grill continues to make headlines for a variety of reasons. So it seems only natural to begin this week’s blog post with a roundup of a few of the more notable stories out there.
- Chipotle reported a 36 percent decline in comparable store sales during January. This comes on the heels of a 14.6 percent drop in same-store sales in the fourth quarter of last year. In addition to the chain’s major food safety issues, bad weather was given partial credit for the January decline.
- The Center for Disease Control & Prevention said Chipotle’s food safety-related outbreaks appear to be over. The report said the investigation was unable to determine what food or foods were involved in the problems and in all likelihood will never be known. There were different strains of pathogenic bacteria involved in two outbreaks, as well as salmonella and norovirus involved in other food poisoning events.
- Merrill Lynch upgraded Chipotle’s stock to a neutral rating from underperform based on research showing that consumers may be willing to return to Chipotle. However, the report said that risks remain but notes sales usually improve after the CDC issues its clearance.
- Teens and young adults did not abandon Chipotle during the fast-casual chain’s food safety crisis according to The NPD Group. Whether this was due to loyalty or a lack of awareness is not clear. NPD’s data does not show which chain or chains gained the most from customers who did leave Chipotle.
- Chipotle will launch its largest ad campaign ever in an effort to win back customers.
- As if Chipotle didn’t have enough problems, a federal court jury in Cincinnati found the chain discriminated against three former female general managers because of gender bias. The chain was also found guilty of violating the federal family leave law.
Economic News This Week
- The Institute for Supply Management’s Manufacturing Index totaled 48.2 in January, up .2 from December. Despite the modest increase, the index’s reading of less than 50 indicates declining manufacturing levels. The New Orders Index hit 51.5, an increase of 2.7 points. The Production Index also went positive hitting 50.2, a 0.3 point increase from December. However, the Employment Index fell 2.1 percentage points to 45.9.
- The Institute for Supply Management’s Non-Manufacturing Index totaled 53.5 in January, a decline of 2.3 points from December. The New Orders Index totaled 56.5, a decline of 2.4 percentage points. The Employment Index totaled 52.1, a decrease of 4.2 percentage points. Out of 18 non-manufacturing industries the Institute surveys, 10 reported increasing activity. Unfortunately, and quite unusually, foodservice and lodging was one of the eight segments that reported decreased activity.
- ADP reports the private sector had a strong January, adding 205,000 jobs. Small businesses, those with fewer than 50 employees, added 79,000 jobs; medium sized businesses, those with 50 to 499 employees, added 82,000 jobs, and large firms, those with more than 500 employees, added 44,000 jobs.
- Initial jobless claims totaled 285,000, an increase of 8,000 for the week ending January 30. The 4-week moving average totaled 284,750, an increase of 2,000.
- The Bureau of Labor Statistics reported the U.S. economy created 151,000 new jobs in January. The private sector added 158,000 new jobs but government agencies lost 7,000. The unemployment rate declined to 4.9 percent from 5.0 percent in December. The last time unemployment was this low was in February 2008. Other positive news was that it appears that wages are finally heading up with average hourly earnings up 2.5 percent in the past year.
- December construction spending rose 0.1 percent from November but was up 8.2 percent compared to December 2014. Residential Construction was up 0.9 percent in December vs. November.
- Car and light truck sales were mixed in January. Overall sales were down less than 1.0 percent vs. January 2015. Autodata Corporation said total U.S. sales were 17.58 million in January on an annualized basis, up from 17.34 million in December.
- Productivity decreased by 3.0 percent in the fourth quarter. This is the biggest drop since the first quarter of 2014 and reflects the weak growth in gross domestic product in the quarter. Keeping with this trend, Unit Labor Costs rose 4.5 percent.
- New orders for manufactured goods fell by 2.0 percent according to the Census Bureau’s full report for December. Shipments fell by 1.4 percent and unfilled orders were down 0.5 percent. New orders for manufactured durable goods decreased by 5.0 percent while shipments fell 2.1 percent and unfilled orders declined by 0.5 percent.
Foodservice News This Week
- Foodservice employment grew by 46,700 in January according to the Bureau of Labor Statistics’ “jobs Friday” data. Not only does the industry continue to hire – which should indicate advancing sales – but also makes foodservice one of the fastest growing employers in the U.S.
- Wendy’s commits to cutting energy usage by 20 percent. To achieve this goal by 2025 Wendy’s will install LED lighting, upgrade HVAC systems and install more efficient equipment.
- Ikea says foodservice is becoming a core business. The Swedish owned furniture retailer said food sales, which include some packaged food products, rose 8.0 percent in the U.S. last year and traffic in its food sections is trending higher than the furnishings departments. Moreover, some customers come into Ikea stores just to eat. The company announced that all 41 of its U.S. stores will receive a restaurant makeover in the next few months.
- Sysco reports case sales grew 3.9 percent, sales increased 0.6 percent to $12.2 billion and net earnings increased 72 percent.
- For its second quarter, Performance Food Group Company reported case volume grew 4.2 percent, sales were up 2.7 percent to $3.9 billion and net income increased 36.7 percent.
- A Qdoba franchisee says raising wages by $2 an hour cut turnover and improved service. Increasing hourly wages to $11 has been a “win-win” for everyone and the higher wage will be expanded to the franchisee’s other restaurants. The Greely, Colo., franchisee pointed out employees are required to show up on time, find their own replacements if they want a day off, and need to work as a team.
- Corporate Stirrings: Food Management Partners announced the abrupt closing of 74 of the chain’s restaurants. The brands closed include HomeTown Buffet, Old Country Buffet, Ryan’s, Fire Mountain, and Country Buffet. The company stated the reason for shutting down the operations was underperformance.
- Growth Chains: First Watch will open a total of 18 restaurants in Houston, Austin, San Antonio and College Station, Texas, and Baton Rouge, Louisiana. Domino’s Pizza will open 150 stores in India in the next 2 to 3 years. An Arby’s franchisee in Houston signed a new agreement for an additional 15 restaurants. Arby’s opened 60 new restaurants and remodeled 179 last year. Dunkin’ Donuts plans to add 430 to 460 restaurants in the U.S. Dickey’s Barbecue inked a development agreement for six locations in Nevada and two in southern California. Carl’s Jr. plans to open 10 restaurants in Australia.
- Comparable Store Sales Reports: Arby’s up 8.1 percent, Ark Restaurants 7.4 percent, Baskin Robbins up 4.4 percent, Chipotle Mexican Grill down 14.6 percent, Dunkin’ Donuts down 0.8 percent, and YUM Brands (KFC up 3.0 percent, Pizza Hut up 1.0 percent and Taco Bell up 4.0 percent.)
For details and same-store sales of other chains, Please Click Here for the Green Sheet.