Since most foodservice operators obtain their food and some supply items from broadline distributors, these companies can provide a snapshot of the industry’s performance. One drawback with this is that the three major distributors companies essentially follow calendar quarters and the shutdown primarily effected only one month, March, of the first fiscal period of 2020. Still\, here’s a quick look at the key numbers reported by the big three broadline distributors in their most recent quarters:
- Sysco’s sales decreased 5.1%. The company’s sales for its third fiscal quarter totaled $9.6 billion. Case sales for U.S. broadline operations fell 5.8% on an organic basis. Adjusted earnings per share decreased $.34 to $.45.
- The Performance Food Group Company reported net sales of $7.0 billion. Case sales to independents declined by 2.7% on an organic basis. Adjusted Diluted Earnings Per Share increased 38.1% to $0.58.
- US Foods net sales were $6.3 billion, an increase of 5.1% primarily due to an acquisition and food price inflation. Total organic case volume decreased 7.3%. Adjusted Diluted Earnings Per Share decreased $0.26 to $0.15
The pandemic certainly impacted the distribution giants, but they appear to be doing better than their customers.
Economic News This Week
- S. real gross domestic product decreased 5.0% in the first quarter of this year, according to the third estimate by the Bureau of Economic Analysis. This is identical to the Bureau’s second estimate. Real gross domestic product in the fourth quarter of 2019 increased 2.1%.
- Real disposable personal income decreased 5.0% in May, per the U.S. Bureau of Economic Analysis. Real personal consumption expenditures increased 1%.
- Initial jobless claims hit 1.49 million, a decline of 60,000 for the week-ending June 20. The 4-week moving average was 1.62 million, a decrease of 160,750. Concern continues to mount about the employment situation in that the number of workers losing their jobs every week has stubbornly stuck at around 1.5 million when the expectation was the number of new claims would decline substantially as businesses reopened. One economist said unless this improves the recovery will be a very long slog.
- May durable goods orders grew by 15.8%, the largest increase since July 2014. The May rise followed a decrease of 18.1% in April.
- New single family home sales increased 16.6% in May compared to April on a seasonally adjusted annual basis and increased 12.7% compared to May of 2019, per the U.S. Census Bureau.
- Existing home sales declined 9.7% in May, according to data from The National Association of Realtors. This is the third straight month of declining sales for existing homes which the NAR attributes to the coronavirus outbreak. Year-over-year sales are down 26.6%. A spokesman for the association pointed out that sales are usually closed 30 to 60 days after going under contract so the May data essentially addresses March and April transactions. NAR expects sales to rebound in the months ahead as the economy opens up.
- The University of Michigan’s final June Index of Consumer Sentiment was up significantly from May. The Index hit 78.1 vs. 72.3 in May. The Current Economic Conditions Index stands at 87.1, up from 82.3 in May. The Index of Consumer Expectations rose to 72.3 from 65.9 in May. A spokesman for the university said the resurgence of the virus will drive down consumer confidence. Further, they believe there is an urgent need for new relief programs.
- Lots of surprises continue to make headlines. Two weeks ago, it was the unexpectedly hefty May retail sales increase. And this week the increase in durable goods orders was another pleasant surprise. Well, here’s another surprise that left some industry observers scratching their heads. A research firm found people are drinking less since the pandemic hit. While sales of liquor, beer, wine and other adult beverages are up at grocers, beverage stores and other retailers, the increase is not enough to offset the major loss of sales volume at restaurants, bars and events.
Foodservice News This Week
- Restaurant menus are shrinking. The goal is to simplify operations and make it easier for the staff. Smaller, more streamlined menus also make purchasing and inventory control easier. Smaller menus also allows for better control of food costs because operators can purchase ingredients in larger quantities. Some examples of restaurant chains reducing their menus include McDonald’s, which in April dropped salads, bagels, yogurt parfaits and all-day breakfast. Denny’s streamlined its menu at least through fall. Dave & Buster’s cut its menu from 40 items down to 15. The champion menu reducer may be IHOP, which cut its menu from 12 pages down to a 2-page disposable version.
- Brinker International’s hoping a new concept will take flight, despite the challenging economy. It’s Just Wings will operate out of Brinker’s existing 1,000 Chili’s and Maggiano’s locations. Customers can only order It’s Just Wing’s food for delivery through DoorDash’s app or website. The menu has wings with a choice of 11 sauces. Curly fries come with all wing orders.
- While food delivery garners most of the publicity, many operators and, for that matter, customers prefer pickup service. The primary reason, of course is the cost associated with delivery, but other factors fuel this preference, too. Darden tried adding its own delivery service but found it inefficient and demand was low. NPD Group reports delivery accounted 13% of restaurant dollar sales in May while takeout sales accounted for 42%.
- CEC Entertainment, parent company of the Chuck. E. Cheese chain, filed for bankruptcy. CEC plans to use the bankruptcy process to talk with stakeholders and landlords. The company will also continue to reopen units as directed by government guidelines. The filing does not affect U.S. and international partners nor corporate entities outside the U.S.
- Perkins Restaurants will exit the Milwaukee market. This move will result in the closing of seven restaurants.
- Darden is the first multiconcept operator to report a full quarter’s worth of operating results when that entire period was influenced during the COVID-19 Pandemic. Darden’s quarter ran March, April and May, during which time sales dropped to $1.27 billion from $223 billion from the comparable period in 2019. This was slightly ahead of forecasts and the adjusted loss per share also beat analysts’ forecasts. As of June, more than 90% of Darden’s dining areas are open, although many with limited capacity. Darden’s management expects to benefit from the crisis in the long run since there will be less competition. Here are Darden’s latest comparable store sales: blended locations down 47.7%, Bahama Breeze down 66.1%, Capital Grille down 62.5%, Cheddar’s Scratch Kitchen down 58.5%, Edie V’s down 65.2%, Longhorn Steakhouse down 45.3%, Olive Garden down 39.2%, Seasons 52 down 69.9% and Yard House down 70.7%.
For details and same store sales of other chains, Please Click Here for the latest Green Sheet.