Monday, May 03, 2010

Restaurant Blowout in March, Industry Index Hits Highest Level Since Sept. 2007; Recession's Over!

"Fueled by improving sales and traffic levels and growing optimism among restaurant operators, the National Restaurant Association's comprehensive index of restaurant activity rose sharply in March. The Association's Restaurant Performance Index (RPI), a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry stood at 100.5 in March, up 1.4 percent from February and its strongest level since September 2007. In addition, the RPI rose above 100 for the first time in 29 months, which signifies expansion in the index of key industry indicators. Other highlights include:

1. For the first time in 22 months, restaurant operators reported net positive same-store sales. Forty-three percent of restaurant operators reported a same-store sales gain between March 2009 and March 2010, up from 28 percent of operators who reported higher sales in February. In comparison, only 36 percent of operators reported a samestore sales decline in March, well below the 57 percent of operators who reported negative sales in February.

2. Restaurant operators also reported a net increase in customer traffic in March, the first positive reading in 31 months. Forty-one percent of restaurant operators reported an increase in customer traffic between March 2009 and March 2010, up from 25 percent who reported higher customer traffic in February. Thirty-six percent of operators reported a traffic decline in March, down from 55 percent who reported lower traffic in February.

3. The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and
business conditions), stood at 101.9 in March up 0.5 percent from February and its strongest level in nearly three years. In addition, the Expectations Index stood above the 100 level for the third consecutive month, which signifies expansion in the forward-looking indicators.

4. Restaurant operators are also gaining confidence in the direction of the economy. Forty-six percent of restaurant operators said they expect economic conditions to improve in six months, up from 38 percent last month and the strongest level since March 2005. Meanwhile, only 12 percent of operators said they expect economic conditions to worsen in the next six months."


At 5/03/2010 11:01 AM, Anonymous Benny The Man said...

Die, recession, die, die, die.

At 5/03/2010 11:14 AM, Blogger James Fraasch said...

Question- Aren't same store sales a bit of a shaky comparison here? I would think that overall DOLLARS spent would be better.

Think about when a restaurant chain closes a store. Won't some people drive the extra 10 minutes to the other, still-opened store for the same meal?

Think Circuit City, if they kept just one store open out of 5000, won't that one store get a nice bump in sales by those people who were dedicated to CC?

I am just saying, it seems like a measure of total dollars spent at restaurants for the month would be a better comparator than measuring same store sales.

Is that data available?


At 5/03/2010 12:02 PM, Anonymous morganovich said...


i think you are asking the right question. it's easy to show YOY growth if your year ago comp was horrible, as march 2009 was.

i don't have any aggregated info, but i do have info for a few big chains. PF changs has been one of the best performers through the downturn. march q revs were 310mm, exactly flat with a year ago. profit however dropped 33%. looks like they traded profit for topline with avg ticket down 3.5% yoy and the number of stores going up.

most others fared less well.

At 5/03/2010 12:31 PM, Anonymous Benny The Man said...

You gloomsters seem to be grasping at straws. This survey shows positives in everything, including what actual operators expect in coming months.

PF Changs is not the entire industry. Maybe they kept volume up through sales and advertising. Chinese food is yesteryear anyway, getting replaced by Thai and dollar food.

Other outfits are improving.

How long can you say nothing is getting btter, when any number of reports show the economy is improving?

At 5/03/2010 12:51 PM, Anonymous morganovich said...


i'm refuting the same bad methodology over and over in hopes that you guys will see that the %'s are misleading.

i'm not saying that things aren't getting better, i'm saying they have not gotten good.

you seem unable to grasp the distinction.

if last year was down 10% and this year is up 2%, that's not growth to crow about. the absolute numbers still stink. this is just like railcars and all these other % gains that keep getting trotted out.

% gains always look good after a really bad period, but march were the last easy comps. watch all this growth deteriorate in coming q's.

absolute growth will remain punk and comps will get harder. in actual output, q1 gdp was at 2005 levels. that's not a good result, especially once you factor in population growth.

US gdp yoy growth slowed from q4 to q1 despite an easier comp while inflation picked up.

that's a bad sign, not a good one.

growth is very punk considering how easy the comps are and how much stimulus there has been and how low rates are.

you still remain silent on my gentleman's bet on q2 gdp slowing from q1.

what's keeping you from taking the other side if things are so good?

no money, just go on record, that's all i ask.

At 5/03/2010 2:33 PM, Blogger Benjamin Cole said...


Of course, we are not back to the good ol' days. We are miles from the 1990s, the best decade maybe we ever had.

Still, everything is now trending the right direction.

Also, there are mountains of capital sitting on the sidelines. More being piled up every day. The world has a glut of capital.

This capital is tip-toeing back into equity and property markets.
The longer we go into recovery, the braver the capital gets--and then we have a boom.

Dow up today, btw.

I am not thiking quarter-to-quarter. I am thinking in terms of years. I would have to look at the numbers to know whether to take you up on your wager.

I am willing to wager that the Dow will be markedly higher in three years than now.

At 5/03/2010 2:38 PM, Blogger KO said...

They claim this "tracks the health of and outlook for the U.S.
restaurant industry."

It seems to do just fine on the outlook. The recent downward move slightly precedes the start of the recession in 2007, and the upward move comes slightly after June 2009, which is when other indicators are saying the recession ended.

It's a lot harder believing it tracks the health of the industry. Is the industry really healthier now than on the front end of the recession? Maybe if the measure is the deadwood got hacked away.

At 5/03/2010 2:44 PM, Blogger James Fraasch said...

All I am saying is we sold the car crash and bought the cancer.

Instead of having a complete meltdown of our economy we chose to print and borrow money and therefore burden future generational output as a result.

YOY comps are easy to beat after the terrible numbers from last year. Look at GM as an example. Nobody wanted to buy their cars because of bankruptcy fears. If they sold one car last y ear and two cars this year, whoohoo! You would say BLOWOUT EARNINGS! Even though in 2008 they maybe sold 1 million cars.

Call me when they get back to a million cars and then I will admit we are recovered!

Call me when unemployment gets below 6% again and I will admit we are recovered. Now we have 9.7% with millions more off the rolls because their benefits expired!

Better? Yes! Back? NO! I will read the report to see if I can see the dollars.

At 5/03/2010 4:26 PM, Anonymous morganovich said...


the dow is not a great economic proxy, especially in real terms. if money supply doubles, so would the dow, but nothing would be produced. recessions and expansions are not determined by dow performance, but GDP. the dow cannot tell inflation from growth.

these restaurant numbers are not "getting better" they have just stopped getting worse.

they are essentially flat YOY.

last year the revenue numbers were considered a disaster. now, the exact same numbers are supposed to be good news? zero growth is bad, not good, especially when it's zero growth off a reduced base.

the chart of actual revenues as opposed to % change would show us all the way at the bottom (hopefully) of a canyon into which we have been sliding for 2.5 years.

profit has behaved even worse.

all that % chart shows is that we have stabilized at a low level after wiping out all the growth since 2003. on a population adjusted basis (pop is up about 6% from 2003), it's well down from then.

At 5/03/2010 5:10 PM, Blogger juandos said...

So ar people using their 'charge cards' at the resturants?

Over at Seeking Alpha Edward Harrison has a commentary: Consumption Growth Continues to Outstrip Income Growth...

Harrison's last paragraph: "Take out government transfer payments and you have zero income growth. As I noted in my review of the GDP numbers on Friday, this is an unsustainable trend. Something has to give eventually: either incomes will have to rise more quickly to sustain the rate of growth in consumer spending or spending growth will have to come down to the lower level of income growth. With huge slack in the US labour market, all indications are that income is the weaker link."...


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