by Wolf Richter, Wolf Street:
“Flat sales” are now a “welcome change.” The New Normal.
National restaurant data and anecdotal evidence has been piling up. “T Vogel,” a commenter on WOLF STREET, put it this way:
My wife and I make almost 30k more than the median family income in my town (northern CA) with no kids. Our rent just went up by 1k a month – landlord selling – starter houses are selling at 500k.
We are not spending a dime more than needed. I plan to skip our weekly night eating out now.
They’re not the only ones to skip restaurants. Costs are going up, not just of restaurant meals, but of life in general. Incomes are lagging behind. And consumers are adjusting…. That’s what a Reuters/Ipsos opinion poll of more than 4,200 U.S. adults confirmed today.
One-third of the respondents said they were eating in restaurants less often than three months ago. The poll was conducted in the second half of January. Of them, 62% cited cost as the primary reason.
Restaurant prices have been rising. The price index for “food away from home,” a subcategory in the Consumer Price Index, increased between 2% and 3% every year since 2012. In January, it rose 2.4% year-over-year. Those price increases are cumulative, and they add up after a while.
It’s not just that eating out is getting more expensive; it’s that stretched households are pushed by price increases elsewhere to divert some of their limited means from eating out to other expenditures.
Yet grocery stores aren’t reporting blockbuster numbers either, Bob Goldin, partner at food industry strategy firm Pentallect, told Reuters. “There’s more splintering of the food dollar, and the pie isn’t growing,” he said. “Where you spend has changed more than the amount you spend.”
The national averages, as seen from the restaurant’s point of view, bear that out.
In its most recent Restaurant Performance Index, the National Restaurant Association lamented “soft same-store sales and customer traffic readings” in December, which kept the Current Situation Index (tracking same-store sales, traffic, labor and capital expenditures) in contraction mode for the third month in a row:
42% of operators said their same-store sales declined year-over-year.
47% of operators said their customer traffic declined year-over-year.
This sort of data has been coming out for a while. It got to the point where TDn2K titled its most recent Restaurant Industry Snapshot: “Flat Sales, Welcome Change for Restaurant Industry in January.”
And more specifically:
While same-store sales growth was flat (zero percent) in January, it represented a welcome break from the ten consecutive months of negative sales growth experienced by the industry through the end of last year.
These flat sales were a function of slightly higher per-person average spending and fewer people going to restaurants: same store traffic was down 2.5% monthly and 4.1% on a rolling three-month basis. As the report put it: “Although still negative, this was the best month for the industry since last May.”
On a two-year basis, same-store sales were down 0.8% from January of 2015.
There were some winners in January, with growing same-store sales: Upscale casual, family dining, and quick service. Casual dining “was able to achieve flat results in January,” hallelujah, thus breaking a streak of 13 months in a row of falling same-store sales.
And there were some losers with same-store sales declines, according to the TDn2K report: fine dining and fast casual.
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