Restaurant sales were soft in May. Price difference narrows between food at home and food away from home. Fast-casual sales growth slows. Digital sales at Panera Bread hit $1 billion. These stories and a whole lot more This Week in Foodservice.
The U.S. Census Bureau’s advance monthly sales survey reported total U.S. retail sales in May declined 0.3 percent from April. The Bureau’s advance April projection of +0.4 percent was unchanged. In the first 5 months of this year total retail sales are up 3.9 percent and were up 3.8 percent in May vs. May 2016.
May restaurant and drinking place sales declined 0.1 percent from April but the May report revised April sales, down from +0.4 percent to - 0.2 percent. Thus, the advance May number is worse than it appears.
In the first 5 months of this year, sales for restaurant and drinking places are up 2.7 percent and up 2.3 percent from May last year.
There are some caveats to consider when analyzing the Census Bureau’s report. The survey does not include the entire foodservice industry, just restaurants and bars. Excluded are hotels, resorts, clubs, retailers, employee feeding, healthcare, schools, colleges, and military feeding.
The advance report is based on a limited sample and the data is frequently revised when a more complete sample is received.
Finally, some but not all, of the sales data is adjusted for seasonality, weekends and holidays but the bureau does not attempt to factor in menu price change.
Economic News This Week
- Initial jobless claims totaled 237,000, a decline of 1,000 for the week ending June 10. The 4-week moving average totaled 243,000, an increase of 1,000.
- The May Producer Price Index remained unchanged from April. Final Demand Prices rose 0.5 percent in April and were down 0.1 percent in March. On an unadjusted basis, the final demand Index is up 2.4 percent in the 12 months ending in May. For the month of May, final demand goods prices were down 0.5 percent while final demand services prices were up 0.3 percent. Final demand food prices were down 0.2 percent and final demand energy prices were down 3.0 percent. “Core prices” for final demand goods, that is, without the volatile food and energy goods, were up 0.1 percent.
- The Consumer Price Index declined 0.1 percent in May led by a decline in energy prices, particularly a 6.4 percent drop in gasoline. Without food and energy, the index is up 0.1 percent in May. In the past 12 months the index for all items is up 1.9 percent. The “core index” – without food and energy – is up 1.7 percent in the last 12 months. (For a closer look at food prices, please see the This Week in Foodservice section below.)
- Industrial Production was unchanged in May. This came after Industrial Production increased for the last 3 months. Manufacturing output declined 0.4 percent while mining was up 1.6 percent and utilities up 0.4 percent. The Federal Reserve also reported that Capacity Utilization for the industrial sector was down 0.1 percent to 76.6 percent, a rate that is 3.3 percent below its long-run (1972-2016) average.
- The New York Federal Reserve’s Empire State Manufacturing Survey hit a two-year high in June, rising a dramatic 21 points for a final reading of 19.8. (Any number greater than zero indicates expansion.) The New Orders Index rose 22.5 points for a final reading of 18.1. The Shipments Index rose 11.7 points for a reading of 22.3. The Unfilled Orders Index rose 8.3 points for a final reading of 4.6.
- Despite an 11.2 point decline, the Philadelphia Federal Reserve Manufacturing Outlook Survey remained well in the positive range with a final reading of 27.6 for June. (Any reading greater than zero indicates increasing activity.) The Index has been positive for 11 months. The new Orders Index edged up from 25.4 in May for a final reading of 25.9 in June. The Shipments Index fell from 39.1 in May to 28.5 in June while the Unfilled Orders Index rose 5.0 points to 14.0. The Employment Indexes edged down by around a point each.
- Privately owned housing starts in May fell 5.5 percent from April and declined 2.4 percent from May 2016. Single family housing starts dropped 3.9 percent from April. The number of Building permits issued in May fell 4.9 percent from April and were down 0.8 percent from May of last year. May single family housing permits issued were down 1.9 percent from April.
- The University of Michigan preliminary June Index of Consumer Sentiment dipped 2.6 points for a final reading of 94.5
Foodservice News This Week
- Food prices increased 0.2 percent in May with food at home prices rising 0.1 percent and food away from home prices up 0.2 percent. In the 12 months ending in May food at home prices have declined 0.2, while food away from home prices increased 2.3 percent. Some observers blame declining restaurant sales at least in part on this disparity in costs between eating out and eating at home. But the difference that now stands at 2.5 percent continues to narrow. As recently as January the difference was 4.3 percent.
- Sales slowdown for fast-casual chains according to Technomic’s Top 250 Fast-Casual Chain Restaurant Report. The report states the fast-casual chains grew 8.4 percent in 2016 which is far faster growth than any other foodservice segment. But, in 2014 fast casual chains grew 13.8 percent and 11.9 percent in 2015. Of course, the basis for the study gets higher every year as these chains add units and Technomic notes the number of new fast-casual locations grew by 8.9 percent in 2016, down from 9.6 percent in 2015. But some chains continued to see double digit sales increases including Panda Express, Jimmy John’s and Zaxby’s.
- Panera Bread Company’s digital sales hit $1 billion on an annualized basis. At the end of the company’s first quarter this year 26 percent of sales were made via mobile order, the company’s website or at an in-store kiosk. Further, the company believes digital sales could double next year.
- Buffalo Wild Wings will open two small-format locations in Minneapolis. Called B-Dubs Express the new concept will offer “streamlined counter service,” and a more limited version of the Buffalo Wild Wings menu. The operation will offer draft and bottle beers and also wine. Delivery will be available through DoorDash.
- Russo’s Restaurants introduced a fast-casual concept featuring counter service and open pasta and pizza making stations. The new restaurant is located in Houston and the company will be actively franchising the operation.
- Restaurant Business International plans to keep the company’s concepts separate. The owner of Burger King, Popeye’s and Tim Hortons will not merge menu items and will also maintain different marketing strategies. However, a corporate spokesman did not comment on looking for synergies in other areas such as purchasing and real estate.
- McDonald’s will hire 250,000 workers this summer. The hamburger giant will rely heavily on Snapchat, allowing perspective employees to submit a “Snaplication.” Applicants can post a picture and the site will then show them in a McDonald’s uniform. The system was tested in Australia last month. The quarter of a million new hires allows for the chain’s normal rate of turnover.
- Corporate Stirrings: Brinker International, . Brinker has been in the 110,000 square-foot building since 1983. The company expects to be in its new location by early 2019. Carrrols Restaurant Group acquired Republic Foods, owner of 17 Burger King restaurants in the Baltimore and Washington, D.C., areas. The price of the acquisition was not disclosed in the press release. Carrols now operates a total of 804 Burger King restaurants in the U.S. Square 1 Burgers has filed for bankruptcy blaming over expansion in the market. There were 12 separate petitions filed with bankruptcy court covering 8 current units, closed units and the company headquarters.
- Growth Chains: Sonic Drive-Ins has signed 5 separate franchise development agreements for 73 locations over the next 10 years. Huddle House plans to open 100 restaurants over the next several years. The Wawa c-store chain plans to open 25 stores in the mid-Atlantic region and 25 stores in Florida over the next several years. Dickey’s Barbecue Pit will open restaurants in Grapevine and Frisco, Texas. Domino’s Pizza will open 30 stores in Turkey, Azerbaijan, and Georgia, 40 stores in Russia as well while planning to open 70 to 90 more annually in the region in the medium term. Chick-fil-A will open two restaurants in Nevada. MODPizza plans to open new units in Dayton, Ohio, and “many more” in the Dayton area.
- Comparable Store Sales Reports: Nathan’s Famous down 7.5 percent.
For details and same-store sales of other chains, Please Click Here for the Green Sheet.