Major foodservice distributors report strong quarterly results. Rental firms pursue restaurants. Taco Bell passes Burger King in sales to become the fourth largest restaurant chain. KFC stores in the UK ran out of chicken. These stories and a whole lot more This Week in Foodservice.
The major publicly held foodservice distributors reported good sales and profits.
Performance Food Group reported a 6.4 percent sales increase to $4.3 billion for the second quarter of its 2018 fiscal year. Total case volume rose 4.3 percent. Net income increased to 240 percent to $78 million.
Sysco reported U.S. sales increased 6.6 percent to $9.7 billion for the second quarter of its 2018 fiscal year. Total case volume increased 3.5 percent with local case volume within the U.S. broadline operations rising 4.8 percent. Net profit for the corporation was $284 million, an increase of 3.2 percent.
For the fourth quarter of its 2017 fiscal year, US Foods reported net sales increased 5.6 percent to $6.0 billion. Total case volume grew 1.9 percent while independent case volume rose 7.1 percent. Net income increased $179 million to $256 million.
Is it safe to assume, then, if the distributors sell more to operators then the operators’ sales are also rising, too? Unfortunately, that is not likely the case here. More likely, major broadliners continue to take share of market from smaller players and/or specialty distributors. Secondly, not all operators’ purchases move through distributors. That direct business could also be down.
Nonetheless, it would appear that, given the performance of the major distributors, operators can’t be doing too badly.
Economic News This Week
- Initial-jobless claims totaled 222,000, a decline of 7,000 for the week ending Feb. 17. The 4-week moving average for claims was 226,000, a decline of 2,250.
- The Federal Reserve is bullish on the U.S. economy, according to a Wall Street Journal article. This would seem to indicate the Fed will continue to keep raising short-term interest rates this year. While higher interest rates seem to have made Wall Street investors nervous, the fact is that rates remain at historically low levels.
- Existing home sales declined 3.2 percent in January to a seasonally adjusted annual rate of 5.38 million homes. January marked the second consecutive monthly sales decline. A spokesman for the National Association of Realtors blames the sales decline on a “glaring inventory shortage.” He went on to say that in most parts of the country buyer traffic was strong. The association also reports median sales price is 5.8 percent higher in January than in the same month in 2017. Obviously rising home prices are having a negative impact on sales. Likewise, rising mortgage interest rates will hurt sales.
- New home sales tumbled 7.8 percent in January from December to an annual adjusted rate of 593,000. January sales this year were down 1.0 percent from January 2017.
- The Conference Board’s Leading Economic Index increased 1.0 percent in January to a final reading of 108.1. This follows a 0.4 percent increase in November and a 0.6 percent December. A spokesperson for the Conference Board now predicts “robust economic growth in the first half of 2018.”
Foodservice News This Week
- “Everyone wants a restaurant in their building,” according to celebrity chef David Chang, owner of 23 restaurants around the world. In fact, restaurants continue to replace department stores and big box retailers as anchor tenants in malls, showing a significant shift in the real estate market.
- Taco Bell is now the fourth largest restaurant chain in U.S. sales. This YUM! Brands concept saw sales rise 5.8 percent to a total of $98 billion in 2017, good enough to pass the former No. 4 Burger King.
- KFC restaurants in England made news the hard way by running out of chicken. The closing of most KFC locations in England and Ireland had people calling their local police and even parliament. KFC blamed the problem on DHL for failure to make deliveries. A personal note. A couple decades ago we ordered chicken from the colonel days in advance for a 4th of July family reunion only to be told when I went to pick it up that they had run out of chicken. No one at the KFC unit seemed concerned about the situation. We ended up getting the chicken from a local fried chicken restaurant and were less than an hour late serving dinner.
- Domino’s does its own delivery and the company’s CEO aims to keep it that way. Patrick Doyle contends self-delivery offers better control, assures company employees remain the maintain the face of the brand in a positive manner, and helps the bottom line by foregoing a 30 percent fee to a third-party delivery organization.
- Dickey’s Barbecue Pit is testing delivery in Minneapolis and Colorado Springs, Colo.
- AIRBNB expands into restaurant reservations. The well-known travel booking site enables customers to make reservations at 650 restaurants. The company declined to explain how it will profit from this service.
- Corporate Stirrings: Rumors persist that Restaurant Brands International will make an offer for Domino’s Pizza. Restaurant Brands currently owns Burger King, Tim Hortons and Popeyes Louisiana Kitchen. Dine Equity, owner of Applebee’s and IHOP has changed the company name to Dine Brands Global. Romano’s Macaroni Grill has emerged from Chapter 11 bankruptcy. The chain operates 86 company-owned locations in 22 states and 21 franchised locations in the U.S. and 7 other countries.
- Growth Chains: Checkers and Rally’s plan to open 59 locations in southern Michigan in the next 6 to 10 years. Baskin Robins has agreements with three existing franchisees to open a total of four stores in Ontario, Canada. Papa John’s International has opened a location in Kyrgyzstan, the first of six restaurants planned for that country. The Race Trac c-store chain plans to open 30 locations in Tennessee by 2023. Wendy’s plans to grow to 7,250 units, in large part by opening smaller designs that can fit in more locations.
- Comparable Store Sales Reports: Applebee’s up 1.3 percent, Bloomin’ Brands (combined up 3.3 percent, Outback Steakhouse up 4.7 percent, Carraba’s up 1.3 percent, Bonefish up 0.6 percent and Flemming’s up 3.1 percent), Cheesecake Factory down 0.9 percent, Cracker Barrel up 1.1 percent, Denny’s (system up 2.2 percent, company owned up 2.1 percent and franchised up 2.2 percent), IHOP down 0.4 percent, Ruth’s Chris Steakhouse up 1.5 percent, Sonic (system down 1.7 percent, company owned down 3.2 percent and franchised down1.6 percent), and Zoe’s Kitchen up 0.3 percent.
For details and same-store sales of other chains, please click here for the Green Sheet.