This week FE&S blogger Jerry Steigler takes a look at sales data for October, examines one of the soon-to-be-many forecasts for 2014, finds a restaurant chain that's redesigning its dining areas to appeal to different demographic groups and much more.
The U.S. Census Bureau reports October retail sales increased 0.4 percent (adjusted) over September, which was a moderate surprise given the government shut down last month coupled with lagging consumer confidence and the chaotic health insurance situation. The consensus forecast was for October sales to be flat.
Sales at restaurants and bars did better than the overall retail sales, growing 0.9 percent compared to September and up 3.9 percent compared to October 2012 on an adjusted basis. Unadjusted, the U.S. Census Bureau calculates that sales at bars and restaurants increased 3.7 percent during the first 10 months of 2013.
The usual cautions apply to the numbers above. The figures are advance numbers based on a limited sample and remain subject to revisions. They cover only bars and restaurants. No hotels, resorts, clubs, or theme parks are included nor are any sales at the so-called institutional segments. Adjusted figures are modified for seasonal variants, weekends and holidays but not for inflation.
The National Retail Federation projects a 2.5 percent in October sales, which leads the organization to be optimistic about the upcoming holiday shopping season. (The NRF does not include autos, gas station or restaurant sales.)
With consumers pessimistic about the economy in general, why are retail sales chugging ahead? One commentator says that when some people get depressed they go to the mall to buy something to cheer themselves up. Or, perhaps they go out for a nice dinner.
Economic News This Week
- The U.S. Economy will "pick up the pace" according to the forecast of the Deloitte University Press. The report's authors just aren't sure when. Recognizing some potential pitfalls ahead — including the Fed's tapering, and the performance of the European and Chinese economies, to name a few — Deloitte believes enough positive factors exist, such as strong auto and real estate markets, to improve the rate recovery.
- Initial-jobless claims took a big drop for the week ending Nov. 16, falling to 321,000, a decline of 21,000. This number of first-time claims has not been seen since summer. The more stable 4-week average declined to 338,500, down 6,750. The "but" that comes with this news is the Veteran's Day Holiday may have pushed down the number of claims filed. The second "but" is that layoffs can get quite erratic around this time of the year with seasonal jobs ending. Some labor experts warn that the claims numbers may not provide an accurate picture until after the first of the year.
- Existing home sales were down 3.2 percent to an annualized rate of 5.12 million in October vs. September. This was the slowest in four months. The National Association of Realtors noted September existing home sales increased 6 percent compared to October 2012 and that prices grew by 12.8 percent in that time period. The association said the major cause of the slowdown was due to the limited number of homes on the market.
- Inflation is not a factor based on the most recent reports from the Department of Labor. The Producer Price Index (or Wholesale Price Index) declined for the second straight month by 0.2 percent in October, with a 1.7 percent decline in energy prices driving down the Index. In contrast, food prices increased 0.8 percent. Core prices, meaning neither energy nor food costs included, were up 0.2 percent. The Consumer Price Index decreased 0.1 in October. Gasoline prices were down 2.9 percent while food prices were up 0.1 percent. Core prices rose 0.1 percent. The price of all items in the last 12 months have increased just 1 percent.
- The Philadelphia Federal Reserve's Manufacturing Index fell to 6.5 in October from a red hot 19.8 in September, showing manufacturing activity slowing in the region. New orders, shipments, and employment all remained positive but at lower levels than they were in September.
- Consumer confidence and spending intentions declined in October, according to the Discover US Spending Monitor. The survey found 47 percent of the 8,200 consumers surveyed thought the economy was poor, which was up 3 percent from October. Also, 57 percent thought conditions were getting worse, up 9 percent from October. The Gallup Organization's U.S. Economic Index rose for the fifth consecutive week but still remains below any other weekly result this year.
Foodservice News This Week
- Red Robin unveiled a truly new prototype. Not just a redesign with upgraded fixtures and lighting, the better burger chain's new model will aim at different demographics with a partitioned off section for families with children, a bar seating area for adult parties, and a "gathering" seating area that can accommodate all parties. Red Robin hopes the arrangement will attract more adults.
- Fifteen million Americans will eat Thanksgiving dinner in a restaurant this year, according to the National Restaurant Association. Another 14 million Americans will order take out holiday dinners, either an entire meal or at least an item or two. Counting those customers who plan on eating out on Black Friday, 46 million of us will patronize restaurants in some manner over Thursday and/or Friday this week.
- Illinois Tool Works announced that their food equipment sales rose 4.4 percent in the company's last fiscal quarter.
- McDonald's and Starbucks are considered two of ten brands that changed the world, according to AdWeek.
- The top three restaurant chains with the highest overall satisfaction ratings, according to Technomic's Consumer Brand Metrics data, are Papa Murphy's Pizza, Texas Roadhouse and McAlister's Deli.
- Emphatica's Delighted Customers Research echoed Technomic's findings cited in the previous paragraph. The study of pizza chains placed Papa Murphy's in the number one slot with 68 percent of their customers delighted with their visit. Fazoli's came in second with a 49 percent rating followed by Pizza Hut (48 percent), Papa John's (48 percent), Domino's (48 percent), Little Caesars (48 percent), Cici's (43 percent), Hungry Howie's (32 percent), Sbarro (26 percent), and Chuck E Cheese's (24 percent).
- Idea of the year? A restaurant owner in an Arab village outside Jerusalem has hit upon something that foodservice operators around the world might want to try. If customers agree to turn off their cell phones while in the restaurant he gives them a 50 percent discount.
- Schlotzsky's Delis will partner with a grocery chain. Schlotzky's announced an agreement with Kentucky-based Houchens Industries for co-branding with the company's Crossroads IGA. The restaurant will feature a modern design and upgraded service in which food will be brought to the customer's table.
- Growth chains: Modmarket, a fast-casual, healthy food chain will open its seventh unit at the Denver airport and plans to open at least six more locations in Colorado and Texas during the next year. Woody's Bar-B-Q master franchisee in Canada plans to add 12 more units to its current 6 locations by the end of 2014. Smashburger's master franchisee in Central American plans on opening 3 restaurants in El Salvador and 15 in Venezuela. Mooyah Burger has signed an agreement for 4 units in Milwaukee. Garbanzo Mediterranean Grill has assigned development rights to Sodexo for Garbanzo locations in healthcare, education, and business feeding operations. Dunkin' Donuts CEO Nigel Travis said in an interview he hopes to add 20 to 30 franchise locations in the Buffalo, N.Y., area in the next few years.
- Comparable store sales reports: Fazoli's (up 8.1 percent) and Jack in the Box (system down 1.4 percent, company-owned down 0.2 percent and franchised down 1.7 percent).
For full details and same store sales of other chains, please click here for the Green Sheet.