Total retail sales inched up 0.1 percent in September compared to August, reports the U.S. Census Bureau. September 2018 sales increased 4.7 percent compared to the same month in 2017. Total retail sales are up 5.4 percent in the first 9 months of this year.
The report also shows foodservice and drinking place sales declined 1.8 percent. The Census Bureau does not attempt to judge the impact of Hurricane Florence on monthly retail sales but obviously both the storm’s severity and wide path must have had a negative impact on foodservice sales. Restaurants and bar sales were up 7.1 percent from September 2017, while in the first 9 months of this year sales have risen 6.1 percent. August sales were revised up to 0.3 percent from 0.2 percent in the August advance report.
If weather is the main cause of the disappointing month-over-month sales, it’s important to note that foodservice operations usually recover from these disasters quickly.
There are some caveats to consider when analyzing the Census Bureau’s report. The survey does not include the entire foodservice industry, just restaurants and bars. Excluded are hotels, resorts, clubs, retailers, employee feeding, healthcare, schools, colleges, and military feeding.
The advance report is based on a limited sample and the data is frequently revised when a larger sample is received.
Finally, some but not all of the sales data is adjusted for seasonality, weekends and holidays but the bureau does not factor in menu price changes.
Economic News This Week
- Initial-jobless claims totaled 214,000, an increase of 7,000 for the week ending Oct. 6. The 4-week moving average totaled 29,500, an increase of 2,500.
- The Producer Price Index for Final Demand increased 0.2 percent in September on a seasonally adjusted basis. The Index for Final Demand Goods declined 0.1 percent, while the Index for Final Demand Services rose 0.3 percent. The Index for food declined 0.6 percent for the month. In the past 12 months the Producer Price Index increased 2.6 percent.
- The Consumer Price Index increased 0.1 percent in September on a seasonally adjusted basis. The CPI is up 2.3 percent in the last 12 months.
- There could be a downside to high consumer confidence. It stands to reason that consumers who are pleased with their economic situation, as well with the economy in general, are likely to invest and spend. Both The Conference Board and the University of Michigan revealed record or near-record consumer confidence readings in the past month. The National Federation of Independent Businesses also reported the confidence level of small businesspeople hit an all-time high. But a Wall Street Journal article said an economic slowdown frequently follows high consumer confidence data. And while it is too soon to know if the stock market decline of last week is a temporary blip or the start of a downturn, it does raise some questions about the longest running bull market in U.S. history.
- The University of Michigan’s Preliminary Index of Consumer Sentiment for October retreated a bit from September while staying at what a university spokesman called “quite favorable levels” and just above the average reading for 2018. The index edged down to 99.0 from 100.1 in September. The Current Economic Conditions Index fell less than a percentage point from 115.2 in September to 114.4. The Index of Consumer Expectations declined to 89.1 from 90.5 in September. The spokesman also noted that confidence in Government Economic Policy rose to its highest level in 15 years.
Foodservice News This Week
- McDonald’s franchisees seek to organize. News reports state that about 400 McDonald’s franchisees — about one fourth of the chain’s U.S. franchise base — met in Tampa, Fla., to explore setting up a dialogue with the burger giant’s corporate office. The purpose would be to express franchisees’ concerns about whether investments required in their stores are paying off. Unlike some other chains, McDonald’s does not have a standing franchisee advisory group. McDonald’s declined to comment directly about the Tampa meeting but said the company is willing to meet with franchisees for constructive discussions. The corporate spokesperson added that renovated stores see sales pick up in the mid-single digit percentage the first year and noted that the corporation does share the cost of some of the upgrades and changes.
- 7-Eleven has some unhappy franchisees. The c-store chain urges franchisees to sign a new agreement before the end of this year but a survey by the National Coalition of Associations of 7-Eleven Franchisees found that of the 767 respondents, 85 percent disagreed that under the new arrangement their stores would be more profitable. Respondents also appeared to have a negative view of their relationship with 7-Eleven corporate. And, 72 percent of the respondents said they would not become 7-Eleven franchisees if they had to do it over again.
- Jack in the Box franchisees want the CEO and the rest of the management team to leave. The National Jack in the Box Franchisee Association, which is made up of 95 franchisees representing roughly 2,000 of Jack in the Box’s 2,200 stores, gave the chain’s top brass a vote of no confidence. The franchise board stated there was “a lack of effective reaction” to the franchisees’ concerns about service, support, assistance and marketing.
- The Consumer Price Index for Food was flat in September and up 1.4 percent in the last 12 months. The index for food at home fell 0.1 percent for the month and is up 0.4 percent in the last 12 months. The price index for food away from home rose 0.2 percent in September and is up 2.6 percent in the past 12 months.
- Domino’s new store design in Texas broke a company sales record. A remodeled Domino’s location featuring an open kitchen called “pizza theater” sold 8,500 pizzas in its first week of operation.
- Capriotti’s Sandwich Shops introduced a new restaurant design. The 40-plus-year-old chain is striving for a more transparent appearance and will include moving turkey ovens and refrigerators to the front of the restaurant so customers can see staff make the food fresh daily. The new design is more flexible and allows franchisees to adapt the plan to different sites.
- Corporate Stirrings: The Pershing Square Capital Management hedge fund invested roughly $900 million in Starbucks stock. While know as an “activist,” Pershing Square’s CEO William Ackman stated that the investment is based on the belief that Starbucks is on the right track and will not seek to suggest management changes. Carrols Restaurant Group announced they have made 3 separate acquisitions for a total of 43 Burger King restaurants located in 5 states.
- Growth Chains: The Wawa c-store chain will open 3 locations in Miami. Shake Shack will continue targeting Asia for expansion with new stores slated for Singapore, Shanghai and Myanmar. Marco’s Pizza plans to add 30 locations across the U.S. by 2020. Burger King will open roughly 1,000 locations by the end this year compared to 600 units in 2015
For the latest same-store sales data on major chains, please click here for the Green Sheet.