Published on Tuesday, 05 June 2012
Written by Jerry Stiegler
What happens when the foodservice industry reports growth but fails to meet expectations? Well, the results are open for interpretation, writes blogger Jerry Stiegler in This Week in Foodservice.
Every week brings good and bad news as well as data that can be somewhat contradictory. This past week was no different but it seems as if a lot of folks — particularly stock market investors — chose to emphasize the negative. Take a look at the various reports and judge for yourself.
The obvious starting place is the National Restaurant Association's Restaurant Performance Index, which retreated in April. The overall Index fell 0.6 percent to 101.6 with both the Current Situation Index and the Expectations Index falling. Almost every aspect of the study was down, including comparable store sales, traffic, capital expenditures and planned capital expenditures. However, it is important to note the NRA's RPI indicates that the market continues to expand, as it has for six consecutive months.
Economic News This Week
News about the employment situation was probably the biggest cause for gloom. Payroll processing firm ADP reported just 133,000 new jobs were created in May, which was much less than forecast. Then the government reported first time jobless claim filings for the week ending May 25 climbed to 383,000, a five week high. On top of that, the unemployment rate increased by a tenth of a point to 8.2 percent when most forecasters looked for it to be unchanged. The real downer was the report that only 69,000 new jobs were created in May vs. projections in the 150,000 range. The private sector created 82,000 jobs while government organizations lost 13,000 jobs. And, the Bureau of Labor Statistics also revised downward the new job numbers for March and April. But, the math wizards at the Bureau do something called "seasonal adjustments" that drastically reduced the raw number of new hires. (Please see section below on foodservice employment.)
- Gross Domestic Product for the first quarter of this year was reduced from 2.2 percent growth to 1.9 percent.
- Last week the Reuters/U. of Michigan pollsters told us that consumer sentiment took a significant leap up reaching the highest level since 2007. Gallup had roughly similar findings. This week the Conference Board said their measurement of consumer confidence fell significantly in May to 64.9 from 68.7 in April.
- The Institute for Supply Management's Manufacturing Index fell to 53.5, a drop of 1.5 from April. The Chicago-area Business Barometer dropped to 52.7 in May from 56.2 in April which marks three straight months of decline. But, for both indices any number greater than 50 indicates business is expanding.
- Pending home sales declined by 5.5 percent, the first drop in five months. Pending home sales were still up 14 percent over a year ago. Case Schiller said homes were flat in May but this follows a string of five straight monthly declines.
- On a more positive note, May auto sales were strong with many manufacturers, including the old Detroit "Big 3" enjoying double digit increases.
- Further, comparable store sales by major department stores, apparel shops and specialty stores were reasonably good with some exceeding projections. The Commerce Department will report on all May retail sales on June 13.
- The Commerce Department said that construction spending rose 0.3 percent in April.
- Personal income rose by 0.2percent and personal spending rose by 0.3 percent. The Gallup Poll said their study of consumer spending has remained consistent with the elevated levels seen in April and May.
Foodservice News This Week
- The Bureau of Labor Statistics stated that the foodservice industry added 7,100 jobs last month or almost 9 percent of the total new jobs in the U.S. Actually, the BLS said that foodservice operators added 163,000 new jobs in May but since the industry traditionally staffs up in for the summer months, the Bureau does their "seasonal adjustment" machinations to arrive at the far lower figure.
- A story appeared in a few media sources questioning if Burger King can retake second place from Wendy's. It is probably a nice intellectual exercise but it is hard to imagine that many fast food hamburger patrons would choose a place to eat based on whether it is the second or third largest chain.
- The Atlanta Journal-Constitution offered a view of local operators who are looking to expand and are encouraged by rising comp store sales, relatively low real estate prices and more readably available credit. Among those mentioned were Tin Drum, Grecian Gyro, Uncle Maddio's Pizza Joint, J.R. Crickets and Marlow's Tavern.
- The Wall Street Journal informs us that chains including, Chili's, Applebee's and Chevy's, are testing small, interactive computer screens allowing customers to do everything from examining the menu and ordering to amusing patrons with games to paying the check.
- Old restaurants never die. Actually, a whole lot of them do but a significant number do manage to hang on or come back in one guise or another. Entrepreneur.com recently ran a story on how Ground Round, Sizzler and Bennigan's were revitalized. Someone evidently saw value in the brand.
- But what happens to a building when a restaurant leaves? The Toronto Globe & Mail tells us that last year when KFC's largest Canadian KFC franchisee went bankrupt, one real estate trust was stuck with 44 closed KFC stores. To date, 34 of the units have been leased to everyone from large U.S. chains to single location operators. The firm expects to have all of the units leased by the end of the year.
- Dunkin' Donuts is planning on opening nine new stores in Birmingham, Ala. in the next five years.
There were no chains reporting comparable store sales this week but you can find the latest data on the Green Sheet.