The National Restaurant Association Restaurant Performance Index hit 101.7 in December, down from 101.9 in November. The decline comes after the index posted moderate growth in October and November. A reading greater than 100 indicates expanding activity.
The Current Situation Index declined to 100.5 in December from 102.1 in November. Operators who reported increased same-store sales for the corresponding month a year earlier fell from 68 percent in November to 44 percent in December. Customer traffic also dropped in December from November. The good news was the Expectations Index edged up a bit, going to 101.8 in December, up .2 from November.
As a group, foodservice operators continue to invest in their businesses. The study shows 58 percent of operators making a capital expenditure for equipment, expansion and/or remodeling in the last 3 months. This is up from 53 percent in the November survey. Looking ahead, a solid of 61 percent plan to make a capital expenditure in the next 6 months for equipment, expansion and/or remodeling.
While the RPI shows very limited growth at least there is some expansion and operators seem quite willing to spend.
Economic News This Week
- Gross Domestic Product increased at an annual rate of 2.1 percent, per the advance estimate from the Bureau of Economic Analysis. This is identical to the GDP in the third quarter of 2019. The BEA will release its second estimate February 27. Assuming the advance estimate holds firm GDP for all of 2019 will be 2.3 percent. In 2018 it came in at 2.8 percent and 2.4 percent in 2017.
- Real disposable personal income declined 0.1 percent in December. Real personal consumption expenditures increased 0.1 percent for the month, according to the Bureau of Economic Analysis.
- Initial-jobless claims totaled 216,000, a decline of 7,000 for the week ending January 25. The 4-week moving average totaled 214,500, a decline of 1,750.
- New orders for manufactured durable goods increased 2.4 percent in December. Shipments of manufactured durable goods decreased 0.2 percent in December.
- The Chicago Production Manufacturing Index fell to 43.2, its lowest level since January 2015. (Any reading less than 50 indicates declining activity.) The New Orders Index fell 6.1 points from December for a January reading of 41.5. The Production Index dropped 3.8 points for a January reading of 42.7. The Order Backlog Index declined by 10.1 points for a final reading of 34.6, which is a 4-year low. The Employment Index was in a contraction mode at 47.0 but was virtually unchanged from December.
- December construction spending declined 0.2 percent from November on a seasonally adjusted annual rate. Compared to December 2018, spending rose 5.0 percent. Private construction spending declined 0.1 percent from November. December residential construction increased 1.4 percent from November.
- The Conference Board’s Consumer Confidence Index hit 131.6 in January, up from 128.2in December. The January Present Situation Index increased to 175.3 from 170.5 in December. The Expectations Index increased to 102.5 in January from 100.0 in December. “Optimism about the labor market should continue to support confidence in the short term and, as a result, consumers will continue driving growth and prevent the economy from slowing in early 2020,” said a Conference Board spokesperson.
- The University of Michigan’s Index of Consumer Sentiment hit 99.8 in January, up .5 from December. This is the highest the Index has been since May of 2019. The Current Conditions Index fell to 114.4 in January from 115.5 in December. In contrast, the Expectations Index rose to 905 from 88.9.
Foodservice News This Week
- McDonald’s closed its it stores in Wuhan, China and nearby cities in an attempt to contain the spread of the coronavirus. McDonald’s is also checking employee body temperatures when they report for work, issuing masks to employees and hand sanitizer to customers. In addition, the hamburger chain is doing more extensive cleaning of delivery boxes.
- Starbucks closed roughly half of its 4,000 stores in China due to the coronavirus.
- For its fourth fiscal quarter ending December 31, 2019, McDonald’s reported a 5.9 percent increase in global same-store sales. For its fiscal year McDonald’s also reported a 5.9 percent increase in same-store sales on a global basis. In the U.S., same-store sales grew by 5.1 percent for the quarter and 6.1 percent for all of 2019. Amid all this good news, McDonald’s did repot a 1.9 percent decline in traffic for 2019.
- Corporate Stirrings: Alimentation Couche-Tard has purchased 17 franchised The Gas Stop stations operating under the Holiday brand from I-90 Fuel Services Inc. The stores are in Sioux Falls, S.D. and nearby Minnesota. American Blue Ribbon Holdings filed for voluntary Chapter 11 bankruptcy to reorganize the company’s Village Inn and Bakers Square restaurant brands. The action does not involve O’ Charley’s or 99 Restaurants. Danu Partners, parent company of Smith & Wollensky, purchased three of the six Strega Restaurants along with five Cafe Strega coffee shops in Boston.
- Growth Chains: McDonald’s forecast a net increase of 1,000 stores this year up from 840 in 2019. Most of the new locations will be outside the U.S. Krispy Kreme has just one store one in New York City which is in Penn Station and it will be closed for remodeling. But when it reopens it will one of seven in New York City including a flagship store on Times Square.
- Comparable Store Sales Reports: McDonald’s – U.S. up 5.1 percent and Starbucks – US up 6.0 percent
For details and same-store sales of other chains, Please Click Here for the latest Green Sheet.