Published on Tuesday, July 17, 2012
Written by Jerry Stiegler
While overall retail sales continue to struggle, the restaurant and bar segment remain somewhat of a bright spot for the U.S. economy.
The U.S. Commerce Department's Economic Census advance June data shows that overall retail sales fell by 0.5 percent vs. May, marking the third straight month of decline. Thus, there is a trend that even the most optimistic economists can't ignore. Overall retail sales in June were up 3.8 percent compared to June 2011.
Restaurant and bar sales, when adjusted for holidays, weekends and other changes in the date pattern from year to year, decreased 0.16 percent compared to May 2011. Comparing June this year with June 2011, the picture was brighter. On an unadjusted basis sales rose 8.6 percent and were up 6.3 percent when adjusted.
Please note all the usual limitations apply. These are advance numbers which can be, and frequently are, adjusted. The Census Bureau surveys only restaurants and bars. Hotels, clubs, theme parks and institutions are not part of this study. None of the figures above are adjusted for menu price increases.
Economic News This Week
- Once again the experts' consensus forecast of first time jobless claims was wrong but claims came in lower than the 365,000 forecast at 350,000 for the week ending July 7. This was 26,000 below the revised claims of 376,000. The seasonally adjusted numbers may have been helped by the fact that a number of auto plants that usually shut down in the summer kept operating because of strong car and light truck sales.
- There is a more complex study run by the Bureau of Labor Statistics that doesn't draw the same scrutiny as the monthly jobs statement. The research is termed the Job Opening & Labor Turnover Survey or JOLT for short. This study showed the number of job openings rose to 3.6 million in May from 3.4 million in April. The number of unemployed people fell from 3.68 to 3.53 but the number of layoffs and firings jumped to 1.9 million from 1.7 million the previous month.
- The Producer Price Index rose a scant 0.1 percent in June after falling in the two previous months. Core prices, which exclude energy and food, rose 0.2 percent. Food prices increased 0.5 percent led by increases in meat while energy fell 0.9 percent.
- The Consumer Price Index was flat in June, virtually mirroring the Producer Price Index. Consumers paid more for food, particularly meat and vegetables, but energy costs fell. "Core" inflation — without food and energy costs — rose 0.2 percent.
- The New York Federal Reserve's Manufacturing Index recovered somewhat after plunging from 17 in May to just 2.29 last month. (A number above zero indicates positive manufacturing activity.) For July, the Index was 7.4.
- The Federal Reserve reported that Industrial Production increased 0.4 percent in June while Capacity Utilization inched up to 78.9 percent from a revised 78.7 percent in May.
- The preliminary July Reuters/Univerity of Michigan consumer sentiment fell to 72 from 73.2 in May. The index is the lowest it has been since December of last year. Gallup's Economic Confidence Index held steady for the first two weeks in July but improved slightly from a dip in mid-June.
Foodservice News This Week
- Knapp-Track reported that June comparable store sales at 60 casual restaurant chains grew 1.1 percent vs. June 2011. Bank of America Merrill Lynch states that Mr. Knapp believes that the results could be inflated by a switch in the July 4 holiday from Monday last year to Wednesday this year.
- The Chicago Tribune carried an article stating that hotel foodservice is moving away from fine dining and in a more casual direction including more bistro, small plates and tapas bars in order to attract more 25- to 35-year-old customers.
- The 35 McDonald's owners in the Mid-South Co-op (Memphis, Northern Mississippi and Eastern Arkansas) held a hiring day on July 1, hoping to increase their staffs by 1,000 employees. One franchisee noted that 75 percent of his managers joined the company as crew.
- A few weeks back we ran a story from the New York Times that said people were replacing "more expensive rewards" with a fancy dinner. Smart Money magazine has an article on the same theme using artisan donuts that sell for $5, $6 or even $11 for a foie gras donuts. The writer states that such "small indulgences" can compensate for a bypassed vacation or a new car.
- The Orlando Sentinel said Red Lobster plans to revamp the way that service staff waits on tables. The plan that started nationwide on Monday eliminates busboys and demoted many of the wait staff to "service assistants." Darden says no one is being laid off, just reassigned to other positions. All new hires must start as service assistants. The changes come on the heels of changes at Darden last year when tip sharing became mandatory and hourly wages for busboys and bartenders were cut. The chain said the new system worked well at test restaurants but Chris Mueller, dean of Boston University's hospitality school, was quoted as saying "No customer ever went to a restaurant saying 'I love it here. They have the lowest labor cost in town.'"
- Cassano's Pizzeria has announced they plan to update all 34 of their restaurants in the Dayton, Ohio area.
- Denny's has signed an agreement with a firm in China to open 50 restaurants. Yumz Gourmet Frozen Yogurt hopes to add 25 units in greater Chicago in the next two to four years and 75 units in other markets. Subway has plans for 11 restaurants in northern Malaysia. Smashburger opened a restaurant in Thousand Oaks, Calif. and has plans for as many as 60 units in the Los Angeles area in the next seven years. McAlister's Deli has signed three franchise agreements that will bring 10 units in greater Tampa, three in Central Michigan, and five in Lincoln and Omaha, Neb. The Little Greek fast-casual chain that currently has four company owned units and 9 franchised restaurants, plans on adding 11 more franchised locations.
- Privately held Boston Market has issued a press release that announced 21 consecutive months of increased same store sales. The release further says comparable store sales were up 8.4 percent in 2011 vs. 2010. The chain's CEO expects comp store sales to be up approximately 6 percent in the first six months of this year.
For detailed information on chain comparable store sales please click here for the Green Sheet.