Both U.S. retail and restaurant sales rose in October. Menu prices continue to outpace grocery store price increases. Consumers rank restaurants in the middle of the pack on satisfying their needs. More people plan to eat out for Thanksgiving this year. These stories and a whole lot more This Week in Foodservice.
U.S. retail sales inched up in October, rising 0.2 percent from September and 4.6 percent from October 2016. In the first 10 months of this year retail sales are up 4.0 percent. The Census Bureau revised September retail sales from +1.6 percent to +1.9 percent.
The October advance report posted restaurant and drinking place sales up 0.8 percent over September and up 3.2 percent over October 2016. In the first 10 months of 2017 restaurants and bars increased sales by 2.8 percent. In the same period, grocery store sales rose 2.0 percent.
The Census Bureau also revised restaurant and drinking place sales from the September advance survey. Unlike total retail sales, restaurants and bar sales were revised downward significantly, from +0.8 percent to +0.1 percent.
It will be interesting to see if October’s advance numbers hold up in next month’s report.
There are limitations and cautions with this report. The advance data is based on a small sample, which is subject to revision when there are more responses to the survey. Note the change in restaurant sales in September outlined above.
Also, the research includes only restaurants and drinking places, which means it excludes 30 percent to 40 percent of the foodservice industry, including hotels, resorts, employee feeding, schools, colleges, health care, and military.
Some of the statistics are adjusted for seasonal variations, holidays and weekends, but none of the data adjusts for menu price changes.
Economic News This Week
- Initial jobless claims rose 10,000 to 249,000 for the week ending Nov. 11. The 4-week moving average increased 6,500 to 237,750. The Department of Labor also reported that claim processing in the Virgin Islands is “severely” disrupted due to hurricane damage but the claims situation in Puerto Rico has improved and the backlog of claims is being reduced.
- The Producer Price Index for Final Demand in October increased 0.4 percent. The index for final demand rose 2.8 percent in the last 12 months The index for final demand goods rose 0.3 percent, while the index for final demand services rose 0.5 percent for the month. The index for foods increased 0.4 percent but the index for the price of energy was flat.
- The Consumer Price Index rose 0.1 percent in October on seasonally adjusted basis. The “core” index, that is the index less energy and food, increased 0.2 percent. In the last 12 months, the total index is 2.0 percent while the core index was up 1.8 percent. (For the CPI numbers on food, please see the Foodservice News This Week section below.)
- Industrial Production increased 1.3 percent in October. Manufacturing rose 1.3 percent and the Utilities Index rose 2.0 percent but mining output fell 1.3 percent. Total industrial production has risen 2.9 percent in the last 12 months. The U.S. Federal Reserve also reported that Capacity Utilization for the industrial sector was 77 percent, a rate that is 2.9 percentage points below its long run (1972-2016) average.
- The Empire State Manufacturing Index fell sharply in November. The New York Federal Reserve reported the index dropped more than 10 percentage points from 30.2 in October to 19.4. However, the October reading was the highest in more than 2 years and any number over zero indicates expansion. On the other hand, the New Orders Index rose 2.7 percentage points to 20.7. The Shipments Index declined more than 9 percentage points but stayed well in positive territory at 18.4. The Unfilled Orders Index did slip into negative territory at minus 4.6. The Average Employee Work Week Index also went negative, but just barely at minus 0.8. The Number of Employees Index slid 4.1 percentage points but still was strong at 11.5.
- The Philadelphia Manufacturing Business Outlook Survey reported slower growth in November. The Index fell to 22.7 from 27.9 in October. However, any number above zero shows growth. The New Orders Index rose to 21.4 from 19.6 in October but the Shipments Index declined from 24.4 to 21.7. The Unfilled Orders Index jumped to 17.0 from 10.9. Both Employment Indexes fell but stayed well into the expansion mode.
- Privately owned housing starts in October were up 13.7 percent from September but were down 2.9 percent from October 2016. Single family housing starts increased 5.3 percent from September. Building Permits issued in October rose 5.9 percent from September. Permits issued for single family homes in October increased 1.9 percent from September.
Foodservice News This Week
- The Consumer Price Index for food was flat in October with food at home flat and food away from home up 0.1 percent. In the last 12 months food at home prices rose 0.6 percent while food away from home prices rose 2.3 percent. So, while the difference between the two has narrowed, menu prices have increased more than grocery prices. Some observers have named this as a factor for soft foodservice sales.
- The American Consumer Satisfaction Index for 2017 found full-service restaurants and limited-service restaurants basically fell in the middle of the 43 industries studied. Limited-service restaurants scored 79 and full-serve averaged 78. Consumers gave television and video players the highest ranking at 87 while subscription TV services came in last at 64. As for individual foodservice operations, Chick-fil-A was first with a score of 87 followed by “all others” at 82. Third was Panera Bread at 82, Papa John’s came in fourth scoring 82 and Subway fifth with an 81. (McDonald’s came in dead last scoring 69.) Full-service restaurants fell from an overall ranking of 81 in 2016 to 78 this year. Cracker Barrel ranked No.1 with an 84 with Texas Roadhouse right behind with an 82. Olive Garden was third with a score of 81. Red Lobster was next also at 81 and Outback Steakhouse rounding out the top 5 with a score of 80.
- More Americans will rely on foodservice operators for their Thanksgiving dinner. A decade ago there were very few restaurants even open on Thanksgiving. This year, 9 percent of consumers will eat their Thanksgiving dinner at a restaurant. This is up from 6 percent who ate out on Thanksgiving 2011. And, of those eating at home, 9 percent said they would pick up part of their meal from a foodservice operator and 4 percent said they’d get the entire meal prepared outside their home.
- Corporate Stirrings: Buffalo Wild Wings received a takeover offer for more than $2.3 billion from Roark Capital Group. The chain has been under attack by activist investor Marcato Capital Management. Earlier this year Buffalo Wild Wings stockholders voted in 3 nominees from Marcato to the restaurant’s board. Roark is a major investor in foodservice operations. Another Broken Egg of America has received a majority investment from the private equity firm of the Beekman Group. Chris Artinian, the managing director at Beekman and an experienced foodservice executive, will be the president of Another Broken Egg. The amount of the investment was not disclosed. Sodexo buys Centerplate. Centerplate is a U.S. business that provides food and hospitality services at sports, convention and entertainment venues. The purchase price was valued at $675 million. Good Times Restaurants Inc. has received a notice from Delta Partners, LP and REIT Redux, LP nominating a slate of 7 persons for the chain’s board of directors. Both of the private investment companies’ currently have 2 directors on the board. Good Times stated that the majority of the board and the firm’s management are confident they are pursuing the correct strategy. FAT Brands Inc. has signed a definitive agreement to acquire Hurricane Grill & Wings for $12.5 million cash.
- Old Chicago Pizza & Taproom has signed franchise agreements for a total of 48 restaurants in 9 states – Alabama, Arizona, Georgia, Indiana, Iowa, Kansas, Kentucky, Missouri and Nevada. Duck Donuts has more than 50 locations in various stages of development. Dickey’s Barbecue Pit has 3 locations ready to open — one in Texas and two in Arizona. Hardee’s plans on opening 4 locations in the Dayton, Ohio, area.
- Comparable Store Sales Reports: El Pollo Loco (system up 1.7 percent, company owned up 0.9 percent and franchised up 2.4 percent), Famous Dave’s (company owned up 0.9 percent and franchised down 2.1 percent), Habit Burger down 0.2 percent, Jamba Juice (system down 0.2 percent, company owned down 3.9 percent and ranchised up 0.2 percent), One Hospitality Group (owned STK down 0.9 percent and owned and managed STK up 1.9 percent), Steak N Shake down 2.0 percent, Texas Roadhouse (company owned up 4.5 percent and franchised up 4.7 percent) and Wingstop up 4.1 percent.
For details and same-store sales on other chains, please click here for the Green Sheet.