Published on Tuesday, October 16, 2012
Written by Jerry Stiegler
A series of macroeconomic indicators posted positive results in September and the restaurant industry analysts remain positive about the results individual publicly traded companies are reporting, writes Jerry Stiegler as part of his "This Week in Foodservice" blog post.
The U.S. Census Bureau said its advance total retail sales for September were up a strong 1.1 percent compared to August. This was against a consensus forecasted increase of 0.7 percent for September. The Bureau also revised its August retail sales to a 1.2 percent percent increase from the advance number of 0.9 percent.
The Wall Street Journal and other observers said there could be an unusual event inflating September sales figures. Specifically, there is speculation that Apple's release of the iPhone 5 on September 21 could skew sales results. Anything is possible but most segments, including restaurants, showed increases.
As for September sales at restaurants and bars, the Census Bureau reported a moderate increase of 0.4 percent compared to August. Compared to September 2011, sales rose 5.6 percent. Both numbers are strong enough to indicate real growth after considering menu price inflation. Through September the U.S. Census Bureau calculates that restaurant and bar sales are up 7.7 percent for the year. Please bear in mind that these are advance numbers subject to revision. The numbers are adjusted to take into account weekends, holidays and other seasonal considerations but are not adjusted for inflation.
Economic News This Week
- Latest first-time jobless claims fell by 30,000. The Labor Department released data showing that claims for the week ending October 6, dropped from the previous week's 369,000 to 339,000, which is the smallest number of claims since February 2008. The initial reaction from some observers was that the fall of first-time claims lent credence to last week's reported improvement in the employment picture. Then a Department of Labor analyst noted that a single large state was responsible for most of the drop in claims, indicating that it might have been a statistical glitch. An analyst at Pierpont Securities said that some applicants wait to file until the start of a new fiscal quarter if their earnings were above average in the last quarter thus increasing their benefits. As a result, looking at the 4 week average of claims filed – which is 364,000 in this case – might provide a more realistic picture of the employment situation.
- The U.S. trade deficit increased to $44.2 billion in August, marking the 5th straight month where the country posted a negative result.
- The Producer Price Index was up 1.1 percent driven in part by increases in the cost of gasoline and fresh fruit. Food products were up 0.2 percent as food price increases from the drought slowly filter through according to the Bureau of Labor Statistics.
- The Consumer Price Index was up 0.6 percent in September following an identical increase in August. The Bureau of Labor Statistics says this is the biggest two-month gain in four years. Leading the Index higher in both months was an increase in gasoline prices. Food prices were up 0.1 percent. Food at home prices were flat while food away from home rose 0.2 percent. In the past 12 months food away from home prices are up an unadjusted 2.8 percent.
- Industrial production rose 0.4 percent in September. The Federal Reserve says the increase was positively influenced by the restarting of oil production in Gulf following the shut down from Hurricane Isaac.
- The Reuters / University of Michigan Preliminary October Consumer Index sprang a pleasant surprise, rising to 83.1 from 78.3 in September. The index reached its highest level since September 2007.
- Gallup's Weekly Economic Confidence Poll increased slightly to minus 19 from minus 21 the week before. Gallup Poll noted that 81 percent of Republicans and 56 percent of independents said the economy is getting worse while 74 percent of Democrats said it was getting better.
- Business inventories rose 0.6 percent in August. Rising inventories could indicate more confidence on the part of business executives or they could mark declining sales. Some economists feel that declining inventories could lead to businesses increasing hiring to rebuild their inventories.
- The N.Y. Federal Reserve's Manufacturing Survey for October was minus 6.2 percent. This is the third month in a row that manufacturing activity declined in the NY region.
Foodservice News This Week
- Fast-Casual is hot, according a just released study from Technomic. But, a number of sources, including the Wall Street Journal and the L.A. Times, report that some fast food chains, looking at the success of Chipotle, Panera and various other fast-casual operators, are upgrading their menu using fresh ingredients to improve the taste and quality of their offerings. Design and décor are also being upgraded. The chains going the fast-casual route cited in the news stories include Arby's, Wendy's, Burger King, McDonald's, Sbarro, Taco Bell, Blaze Pizza and PizzaRev.
- McDonald's is reacting to the lame European economy by offering coupons and other deals, according to the Wall Street Journal.
- Financial analysts see decent earnings for most restaurant chains, according to MarketWatch. YUM! has already reported better than forecast results and the writer sees both profit and revenue growth for Starbucks, Brinker and Chipotle with McDonald's reporting flat profits.
- Higher prices, smaller portions, and items disappearing from menus are the result of the Midwest drought based on an article in the L.A. Times. Moreover, the story went on, restaurant customers are very much aware of the situation and are cutting back on their spending. This conclusion was based chiefly on anecdotal reports rather than any hard data.
- The Price Chopper supermarket chain has a new concept store. The store features 16 quick-service dining areas, according to an article on Supermarketnews.com. The operations will include a NYC style deli, a Mexican-themed restaurant, a pizza restaurant, a sub shop, a New England style fish fry, a full service salad bar, and a Chef's Grill serving steak and seafood. The operation will have 140 seats plus seasonal outdoor seating.
- Ohio's first Jack in the Box store caused traffic snarls and bumper to bumper traffic for weeks. Despite "Jack's" hiring off-duty police officers to direct traffic, both the local police and the county engineer's office received a lot of angry calls.
- Growth Chains: Fusian Fast Casual Sushi with two restaurants currently will open a third in Columbus, Ohio, early next year. Steak 'n Shake had signed an agreement with their Mid-East franchisee to open 40 restaurants in the United Arab Emirates. Firehouse Subs expects to open 42 restaurants in Wisconsin over the next 9 years. Hurricane Grill & Wings is planning on opening 20 new restaurants in 2013. Wingstop has opened 30 restaurants this year with 25 to 30 more set to open in the 4th quarter.
- Comparable Store Sales reports this week are for Ruby Tuesday (up 1.9 percent), Wingstop (up 13 percent), and YUM! (Blended up 6 percent, KFC up 4 percent, Pizza Hut up 6 percent and Taco Bell up 7 percent.)
For details and same store sales of other chains, please click here for the Green Sheet.