How are the major foodservice suppliers doing? Operator’s hiring roared ahead in February. Bloomin’ Brands say they are committed to Bonefish Grill. Thornton’s C-stores make a commitment to foodservice in the Chicago market. These stories and a whole lot more This Week in Foodservice.
For reasons hard to explain, most of the companies that provide equipment and supplies to the foodservice industry are small and/or privately held. The roster of publically held, major companies supplying the foodservice industry include Cintas, Ecolab, Illinois Tool Works, International Paper Co., Libbey Inc., Manitowoc, Middleby Corporation, Newell Rubbermaid, Standex International and Sysco.
The problem in analyzing these firms’ financial performance is that foodservice represents but one of the industries they sell to and, in some cases, foodservice may be a small part of their business. Most companies do not provide a breakout of foodservice sales. Nonetheless, it is interesting to see how these companies performed financially. (Manitowoc is excluded from this analysis as the company just spun off their foodservice business into a publicly traded entity.)
Of the nine companies listed above, five reported sales declines in their most recent fiscal quarter. All of the companies were profitable with five reporting increased profits, three seeing profits decline and one reporting that their profitability was flat.
Three of the companies did provide some insight into foodservice sales. Illinois Tool Works stated that its food equipment group saw sales rise 2.0 percent but this would include sales to bakeries and other non-foodservice operations. Middleby Corporation reported its commercial foodservice sales dropped 2.8 percent. Standex reported a 7.7 percent decline in sales from its foodservice divisions.
For a chart of the data shown above, Please Click Here.
Economic News This Week
- The Institute for Supply Management’s Manufacturing Index increased 1.3 points to 49.5 in February. Any number less than 50 indicates declining activity. This was the fifth consecutive month that manufacturing activity was in contraction mode. The New Orders Index remained positive at 51.5 as did the Production Index at 52.8. The Employment Index improved by 2.6 percentage points but stayed in negative territory at 48.5 percentage points. Of the manufacturing industries surveyed, results split with nine reporting growth and seven reporting declines or flat.
- The Institute for Supply Management’s Non-Manufacturing Index Grew in February for the 73rd consecutive month. The Index came in at 53.4 which is virtually identical with January’s 53.5. The New Orders Index registered 55.5 percent down 1 percentage point from January. However, the Employment Index fell 2.4 percentage points from January to 49.7 percent, the first time this index has been below the break-even point of 50 since February 2014. Of the 14 non-manufacturing industries that reported expansion in February, acommodations & foodservice had the largest growth.
- New orders for manufactured goods increased 1.6 percent in January after declining the previous two months. Shipments rose 0.3 percent and Unfilled Orders increased 0.1 percent.
- Labor productivity decreased at an annual rate of 2.2 percent in the fourth quarter of 2015. Unit labor costs rose 3.3 percent based on a 1.1 percent increase in hourly compensation and the 2.2 percent decrease in productivity.
- February car sales were strong, aided by deep discounts and subsidized leases from the auto manufacturers. One analyst said that low interest rates, employment gains, and inexpensive gasoline will result in 17.8 million vehicle sales this year, up from 17.5 million cars and light trucks sold last year.
- Construction spending increased 1.5 percent in January compared to December and was up 10.4 percent from January 2015. Residential construction spending was virtually even with December.
- ADP’s National Employment Report estimated the U.S. private sector added 214,000 new jobs in February at a seasonally adjusted rate. Large employers (those with 500 or more employees) were particularly active, with 76,000 new hires. Small employers (less than 50 employees) also added 76,000 new employees, while midsized employers (50-499 employees) hired 62,000.
- Initial jobless claims totaled 278,000, an increase of 6,000 for the week ending February 27. The 4-week moving average for claims was 270,250, a decline of 1,750. Thus, claims continue to stay low and move in a relatively narrow range.
- The U.S. economy added an impressive 242,000 new jobs in February on a seasonally adjusted basis. The private sector added 230,000 jobs while government entities added 12,000. The Unemployment Rate stayed at 4.9 percent. This kind of growth means the economy can create jobs for people entering the workforce including individuals who had dropped out of the job market.
Foodservice News This Week
- Foodservice hiring shot up 40,200 jobs in February making the industry the leader in adding employees for the month. Operators increasing the size of their staff represents a good indication that the foodservice business is good.
- Bloomin’ Brands says the company remains committed to Bonefish Grill. The company plans to close 14 locations but also plans to remodel several other locations as the chain plans “to take Bonefish back to the basics that made the concept successful.” But some see the seafood segment as struggling and one analyst believes Bonefish could be sold.
- The Thornton’s c-store chain has targeted the Chicago area to develop its grab and go kitchen with the goal of establishing these stores as a food and beverage destination. The operations will offer extensive breakfast and lunch menus as well as an ice cream bar and a large bakery selection.
- Sprouts Farmer’s Market will expand its ready-to-eat deli menu. More than 70 percent of the chain’s new stores and 30 existing locations will add the new deli feature this year.
- Corporate Stirrings: Fuzzy’s Taco Shop sold a 70 percent stake in the chain to NRD Capital. Fuzzy’s operates 90 units, including 83 franchised locations. NRD Capital bought Frisch’s Big Boy restaurants last year. Eby-Brown Company has purchased the assets of Liberty, USA, a West Mifflin, Pa.-based privately held convenience store distributor serving the Midwest, Northeast and East Coast. Terms of the purchase were not disclosed in the press release. Sysco will eliminate 2.0 percent of its workforce or about 1,200 administrative positions in order to attain “a more aggressive operating income target.”
- Growth Chains: Starbucks will open its first store in Italy in Milan after avoiding the country because of its unique coffee culture. Starbucks will open 12 to 15 restaurants in South Africa in the next 2 years. Papa John’s will open 10 restaurants in Israel. Dairy Queen, which does not have any stores in the state, plans to open 15 to 20 locations in Vermont in the coming years. Fazoli’s will open 12 franchised restaurants this year. Wahlburgers has signed 5 franchise agreements for a total of 30 restaurants in 7 states. Wahlburgers, which has 7 units, plans on having 118 locations by 2022. Checkers will open approximately 50 restaurants this year. Sunny Street Café will open three restaurants in Southern Illinois. Carl’s Jr. plans to open 150 restaurants in Japan in the next 10 years.
- Comparable Store Sales Reports: Bob Evans down 3.6 percent, Carrol’s Restaurant Group up 5.1 percent, Chuy’s up 3.2 percent, Habit Burger up 3.3 percent, Ignite Restaurant Group (Joe’s Crab Shack down 3.8 percent & Brick House Tavern down 2.9 percent), Kona Grill up 3.2 percent, and Wingstop up 5.9 percent.
For details and same-store sales of other chains, Please Click Here for the Green Sheet.