The National Restaurant Association reports December restaurant performance remained modest. Foodservice operators kept hiring in January. Walmart introduces another C-store concept. Technomic says takeout food meal sales are continuing to grow.
The National Restaurant Association characterized its Restaurant Performance Index reading in December as relatively steady. The Index stood at 100.5 in December, down from 100.7 in November. Any result that exceeds 100 shows foodservice industry expansion.
The Current Situation Index edged down 0.1 percent for a final reading of 99.5. Same-store sales softened but customer traffic showed slight improvement.
The Expectations Index was unchanged at 101.6. Operators are bullish on sales increasing in 6 months with 39 percent predicting an increase and just 10 percent expecting sales to decline. This is the best reading on sales in months. And in the last 3 months the majority of operators expect general economic conditions to improve.
As for the operators purchasing and purchasing plans, 57 percent of those surveyed said they had made a capital expenditure for equipment, expansion and/or remodeling in the last 3 months. This is not a bad reading but it is down 64 percent who reported they had done so in November. Meanwhile, 57 percent said they planned to make a capital expenditure in the next 6 months, roughly the same as 58 percent who said so in November.
Economic News This Week
- Initial jobless claims remain low by historical standards. The number of claims for the week ending Jan. 28 totaled 246,000, a decline of 14,000. The 4-week moving average totaled 248,000, an increase of 2,250.
- according to Automotive News. January is traditionally the slowest sales month of the year and the industry was coming off an extremely strong sales month in December.
- Labor productivity increased 1.3 percentin the fourth quarter of 2016 on annual basis. The Bureau of Labor Statistics reported that output increased 2.2 percent as hours worked increased 0.9 percent. Compared to the same period in 2015, productivity increased 1.0 percent. Unit labor costs in the fourth quarter increased 1.7 percent with a 3.0 percent increase in hourly compensation and a 1.3 percent increase in productivity. Unit labor costs have increased 1.9 percent over the last 4 quarters.
- The Institute for Supply Management’s Production Manufacturing Index hit 56 percent in January, up from 54.5 percent in December. (Any reading that exceeds 50 indicates an increase in manufacturing activity.) This is the 92nd straight month of increasing manufacturing expansion. The New Orders Index was at 60.4, virtually identical to December’s 60.3. The Employment Index was 56.1 in January, an increase of 3.3 points. The Order Backlog Index inched up 0.5 points for a reading of 49.5. Of the 18 manufacturing industries included in the ISM’s survey, 12 reported growth in January.
- The Institute for Supply Management’s January Non-Manufacturing Index totaled 56.6 in January, an increase of .1 compared to December. The New Orders Index fell 2.1 percentage points for a final reading of 58.6. The Employment Index increased 2.0 percentage points for a total of 54.7. (Any number that exceeds 50 indicates growing activity.) Of the 17 industries surveyed by ISM, 12 reported growth, including Accommodations & Foodservice.
- The Chicago Business Barometer fell in January by 3.6 points. Its final reading of 50.3 is the barometer’s lowest since May of last year. Any number that exceeds 50 indicates expanding business activity and as of January this index is barely in growth mode.
- December construction spending declined 0.2 percent compared to November but was up 4.2 percent over December 2015. Residential construction was up 0.5 percent over November.
- Job creation was strong in January, according to ADP’s National Employment Report. The private sector added 246,000 jobs on a seasonally adjusted basis. This is the best month for new jobs since January 2016.
- Bureau of Labor Statistics. These represent the strongest hiring levels in four months. Actually, the private sector had 237,000 new hires but this was partially offset by a decline of 10,000 in government jobs. The unemployment rate stood at 4.8 percent, up .1 percent from December
- New orders for manufactured goods increased 1.3 percent in December, according to the U.S. Census Bureau’s full report. Shipments increased 2.2 percent, while unfilled orders dropped 0.6 percent. Durable goods orders decreased 0.5 percent.
- The Conference Board’s Consumer Confidence Index totaled 111.8 in January, down from December’s total of 113.3. The Present Situation Index increased to 129.7 from 123.5 in December but the Expectation Index dropped to 99.8 from December’s reading of 106.4. A spokesperson for the board pointed out that the December reading was a 15-year high and that “consumers remain confident that the economy will continue to expand in the coming months.”
Foodservice News This Week
- Foodservice operators chalked up another strong hiring month with the industry adding 29,900 jobs in January. In the past 12 months the Bureau of Labor Statistics calculates the industry has added 286,000 new employees.
- Walmart introduces another c-store concept. The 2,500 square foot stores are in Rogers, Ark., and Crowley, Texas, and will offer a hot food bar, ice cream, sandwiches and salads. The giant retailer has tested various convenience store concepts over the years.
- Consumers are ordering takeout more often, Technomic reports. Almost 1 out of 5 consumers order takeout from restaurants 10 or more times a month. This is up from 16 percent in 2013. A quarter of 18 to 35 year olds use third-party delivery services more often than a year ago.
- Starbucks will hire 10,000 refugees around the world in the next 5 years.
- McDonald’s and UberEATS partner to test delivery of Big Macs. The test will include 134 McDonald’s locations in Florida’s Miami-Dade and Broward counties, which are about 70 percent of the units in that area. Also in the test are 50 restaurants in Orlando and 30 in the Tampa area. The full McD’s menu is available with the exception of soft-serve cones and promotional items like McPick 2. An UberEATS booking fee of $4.99 applies to each order.
- Hooter’s fast-casual concept takes flight. Called “Hoots,” the first is scheduled to open in Cicero, Ill., a suburb of Chicago. The restaurant’s abbreviated menu will feature some of Hooters best-selling items. The restaurant will offer counter service and a full-serve bar. Hoots will have both male and female staff and there will not be abbreviated uniforms.
- Andrew Puzder says he will divest himself of CKE ownership. The nominee for Secretary of Labor stated he is “… fully committed to becoming secretary of labor.”
- Corporate Stirrings: The Bravo Brio Restaurant Group will “examine all alternatives.”The chain is under pressure from outside investors and exploring alternatives usually means the company will be put up for sale. Performance Restaurant Group has purchased the wholesale operations of Bar Harbor Seafood
- Growth Chains: McDonald’s will open 50 restaurants in Russia this year. In-N-Out Burger is scouting for locations in Houston. Chipotle Mexican Grill will open 200 restaurants this year. Freddy’s Frozen Custard will open 70 restaurants this year.
- Comparable Store Sales Reports: Chipotle Mexican Grill down 4.8 percent.
For details and same-store sales of other chains, refer to the Green Sheet.