U.S. retail sales increased in August but at a much slower rate than earlier his summer. Starbucks may not be able recover its lost sales until employees return to their offices. New York City will allow some restaurants to add a 10% pandemic surcharge to dining room customer’s bills. Texas now allows restaurants to utilize up to 75% of their dining room capacity. These stories and a whole lot more This Week in Foodservice.
The U.S. Census Bureau’s advance report for August retail sales showed an increase of 0.6% from July. This was substantially less than most forecasts and down from increases of 7.5% in June and 0.9% in July. In the first 8 months of 2020 retail sales are down 1.8%. August total sales this year are up 2.6% over August 2019.
The advance sales report for foodservices and drinking places increased at 4.7%, an obviously higher rate than the total retail sales compared to July but still down 15.4% from August 2019. The advance July sales figure of 5.0% was revised down to 4.1%. Through the first 8 months of this year foodservice and drinking place sales are down 20.9%, an amount that is probably impossible to make up this year.
There are some things to consider when looking at the government data. First, the study surveys only restaurants and bars. Not included are hotels, motels, resorts, transportation feeding, retailers (C-stores, supermarkets, etc.) employee feeding, hospitals, nursing homes. schools. colleges and universities and military feeding.
The statistics are based on small initial samples and are subject to revisions when a larger sample is received. Some of these revisions are extensive. And, while the sales data is adjusted for calendar shifts such as holidays, weekends, etc. there are no adjustments for menu price changes.
Economic News This Week
- Initial-jobless claims totaled 860,000, a decline of 33,000 for the week ending September 12. The 4-week moving average totaled 912,000, a decline of 61,000. While the number of new claims continues to inch lower, many observers continue to wonder why the total claims remain persistently high.
- Industrial production increased 0.4% in August, per the Federal Reserve. This was the fourth consecutive monthly increase but the Index remains 7.3% less than February’s pre-pandemic level. Industrial production declined 7.7% from August last year. Manufacturing production rose 1.0% in August while mining production fell for the month as a tropical storm and a hurricane caused sharp but temporary drops in oil and gas extraction and well drilling. Utility production output fell 0.4%. Capacity utilization for the industrial sector totaled 71.4%, a rate that is 8.4% below its long-run (1972-2019) average but is 7.3 percentage points above its April low.
- Manufacturing expanded at a “solid clip,” according to the New York Federal Reserve’s Manufacturing Survey for September The Index rose 13.0 points to 17.0. (Any number greater than zero shows increasing activity.) The New Orders Index grew from minus 1.7 in August to 7.1. The Unfilled Orders Index improved but stayed in negative territory at minus 9.4.
- The Philadelphia Federal Reserve’s September Manufacturing Busines Outlook Survey saw its Current Activity Index decline 2 points for a reading of 15.0. Any reading greater than zero indicates in increasing activity. The New Orders Index increased to 25.5 from 19.0. The Shipments Index totaled 36.6, a 27-point increase. Both the Employment Index and the Average Work Week Index increased which is a very positive sign for the economy.
- August housing starts declined 5.1% from July but increased 8% compared to August 2019, per the Census Bureau. Single-family housing starts increased 4.1% compared to July. Building permits Issued for privately owned housing units fell 0.9% from July but rose 2.8% from August of last year. Building permits issued for single family homes were up 6.0% from July.
- The Conference Board’s Leading Economic Index totaled 106.5 in August, a 1.2-point increase. This follows increases of 2.0 in July and 3.1 in June. The Index suggests the U.S. will enter the new year “under substantially weakened economic conditions,” according to a Conference Board spokesperson.
- The University of Michigan Index of Consumer Sentiment improved in September, per the preliminary survey for the month. The Index of Consumer Sentiment was 78.9 mid-month, up from 74.1 in August. The Current Economic Conditions Index was 87.5, up from 82.9 in August. The Index of Consumer Expectations reading was 73.3, up from 68.5 in July.
Foodservice News This Week
- Starbucks says its sales recovery depends, in part, on workers returning to urban areas. The company says many of its stores in central business centers remain closed but reports an increase in sales at many suburban locations.
- The New York City Council passed legislation allowing restaurants to add 10% to customers’ bills as a coronavirus recovery surcharge. The surcharge applies only to on premise tabs, guests must be informed the charge is not part of the employees’ tips, and any operations with more than 15 locations nationwide cannot use the recovery charge. The charge will remain in effect until restaurants can open their dining areas at 100% capacity.
- Restaurants in Texas can use up to 75% of their indoor dining space, per an executive order signed by Governor Greg Abbott. Previously Texas had limited restaurants to 50% occupancy. Critics say the change won’t help much because ’social distancing rules won’t permit the addition of many more customers.
- Sardar Biglari makes another run at Cracker Barrel. Biglari Holdings has equity positions in Steak n’ Shake and the Western Sizzlin’ Steakhouse chain as well as 8.7% of Cracker Barrel’s outstanding shares. He has been critical of Cracker Barrell’s management for years. Now Biglari has zeroed in on the family-dining chain’s investment in the Punch Bowl Social eatertainment chain which may not survive the pandemic and lost Cracker Barrel $133 million. It has been suggested that Cracker Barrel has been able to fend off Biglari in the past.
- Cracker Barrel will open a catering kitchen in Indianapolis, which is the family-dining chain’s version of a ghost kitchen. The new facility will be used not just for catering orders but also for menu items that other kitchens can’t handle.
- Papa John’s plans to setup a headquarters office in Atlanta. Functional areas moving to Atlanta include menu innovation, marketing and customer experience.
- Growth Chains: Cracker Barrel will open three restaurants next year. Taco John’s opened nearly half a dozen restaurants across Illinois, Indiana, Ohio and Tennessee since the pandemic struck. C-store chain Sheetz will open 50 locations in central Ohio by 2025. Teriyaki Madness will open five restaurants in the Milwaukee area by the end of this year.
- Comparable Store Sales Reports: Cracker Barrel down 39.2% and Dave & Buster’s down 87.0%.
For details and same store sales of other chains, Please Click Here for the latest GREEN SHEET.