Sysco Reports Sales Growth, Restaurants Rely on Promotions, and Updated Equipment Supplier Data

This Week in Foodservice notes that the NRA's Restaurant Performance Index shows soft sales but foodservice operators continue to invest in their businesses. Also, inflation remains under control but operators need to rely on promotions to pull in customers, Sysco reports sales growth, a dozen plus chains reveal their comp store sales and much more.

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The National Restaurant Association's Restaurant Performance Index stayed positive – barely – in September, falling by 0.3 percent to 100.2 from August's level of 100.5. The Current Situation component dropped by 0.7 percent to 99.9 as the survey respondents reported same-store sales softened. Customer traffic showed a similar pattern in September. The Expectations Index crept up in September to 100.5 from 100.4 in August.

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On a positive note, 57 percent of operators said they had made a capital expenditure for equipment, expansion and/or remodeling in the last 3 months. September marks the fifth consecutive month where more than half of the operators made a capital expenditure. Looking to the future, 52 percent of the operators surveyed indicated they planned on making a capital expenditure for equipment, remodeling and/or expansion in the next 6 months. While September appears to be a tough month sales wise, operators are optimistic enough to keep spending.

Economic News This Week:

  • Both the Producer Price Index and the Consumer Price Index indicate inflation is under control. The Producer Price Index fell 0.1 percent in September due in large part to an 18 percent drop in the prices of fresh vegetables. Core prices, meaning sans food and energy costs, rose just 0.1 percent. The September Consumer Price Index increased 0.2 percent mostly driven by a 0.8 percent increase in energy prices. Consumer food prices were flat.
  • Private sector job growth had the smallest increase in six months. Automatic Data Processing put the number of jobs added in October at 130,000. In the 3 months ending in October, average monthly private sector jobs grew 142,000, down from 220,000 jobs early in the year. It is important to note that ADP's jobs data may not agree with the U.S. government's jobs reports.
  • Initial jobless claims fell to 340,000, a decline of 10,000, for the week ending October 26. The more reliable 4-week moving average rose to 356,250, the highest number of claims since April and pretty close to where total claims were for much of the year.
  • The Institute for Supply Management's Manufacturing Index for October inched up to 56.4 from September's 56.2. New orders increased while production and employment declined but both remained in the positive range.
  • The Chicago Purchasing Managers Index leaped to 65.9 in October from 55.7 in September. Production, new orders and back orders all increased by double digits. This is the highest the index has been since March 2011 and is the biggest one month increase in 30 years.
  • October auto and light truck sales ran at an annualized rate of 15.2 million, down slightly from August and September but up from 14.4 in October 2012. Most manufacturers reported increased sales but the three U.S.-based car companies recorded double-digit growth for the month, probably assisted by lower gas prices. Big pickup trucks and SUVs sold well helping the Big Three achieve solid gains.
  • Pending home sales in September dropped 5.6 percent making the fourth straight month of decline according to the National Association of Realtors.
  • Consumer confidence continues to falter. The Gallup Organization's Economic Confidence Study rose slightly the week ending October 27 to minus 30. It stood at minus 36 the week before and minus 39 two weeks previously. But, these findings are far under others readings this year, which have been as high as minus 3 in June. Bloomberg's Consumer Comfort Index was minus 37.6 for the week ending October 27, the lowest the Index has been in a year.

Foodservice News This Week:

  • Sysco reported a 5.7 percent sales increase for the distributor's most recent fiscal quarter which ended September 28. Sysco's internal food cost inflation was calculated at 2.1 percent, acquisitions added 2.3 percent to sales while foreign exchange fluctuations decreased sales by 0.5 percent. The company reported case sales were up 1.8 percent excluding acquisitions. Given Sysco's position in the foodservice market, some would consider the distribution giant's sales as an index of industry performance.
  • Restaurants are discounting more this year, according to The NPD Group. After backing off price and other promotions in 2012, it appears that operators have gone back to deals in response to soft customer counts.
  • The cost of food away from home rose just 0.1 percent in September over August on a seasonally adjusted basis, according to the U.S. Bureau of Labor Statistics. In the 12 months ending September 30, the Bureau says that food away from home prices increased 1.9 percent unadjusted.
  • Some investors love restaurants despite all we read and hear about consumers cutting back on dining out. Investors jumped on the stocks of some chains that had recent initial public offerings, including Potbelly and Noodles & Co. The Wall Street Journal looked at 20 selected restaurant stocks and found the average share price is up 57 percent. Technomic speculates that while the industry is growing slowly overall investors are searching for the next Chipotle.
  • Home-grown rivals are challenging U.S. based chains in China. Reuter's reports that Chinese-owned chains such as Dicos, Country Style Cooking, Kung Fu Catering and others are "nibbling away" at their U.S. rivals by stressing Chinese ownership, healthy food and lower prices.
  • Buffets, Inc. has become Ovation Brands. The Greer, S.C., company, parent of Ryan's, Hometown Buffet, Old Country Buffet, Country Buffet, Fire Mountain, and Tahoe Joe's Famous Steak House celebrated its 30th anniversary with the name change.
  • Kangaroo express links up with Little Caesars. The 1,500-unit C-store chain that operates in 13 states will offer the Little Caesars Hot-N-Ready program in select stores.
  • Growth chains: New Miami Subs Grill signed a franchise agreement to add three units in Miami. Dunkin' Donuts has a franchise agreement for nine new locations in Reno, Nev. Bar Louie will open seven new restaurants in the fourth quarter of this year. Wendy's Philippines operations, the only country where sub-franchising is allowed, plans to triple the number of units to 100 by 2016. Starbucks will open 1,500 stores next year, half of them in Asia.
  • Comparable Store Sales Reports: Applebee's (down 0.4 percent), Buffalo Wild Wings (company-owned locations up 4.8 percent and franchised locations up 3.9 percent), Chuy's (up 1.9 percent), Denny's (system wide up 1.2 percent, company-owned up 1.2 percent and franchised up 0.7 percent), Einstein Noah Restaurant Group (down 1.4 percent), Good Times Burgers (up 26 percent), IHOP (up 3.6 percent), Kona Grill (up 2.6 percent), Logan's Roadhouse (down 3.9 percent), Mitchell's Fish Market (down 1.4 percent), Ruth's Chris Steakhouse (up 4.2 percent), Starbucks (up 8 percent), Texas Roadhouse (company-owned up 2.6 percent and franchised up 4 percent), and Wingstop (up 8.6 percent).

For complete details and same-store sales of other chains, please click here for the Green Sheet.

Financial Reports for Foodservice Suppliers: Included this week are Cintas, Ecolab, Manitowoc and Sysco. Please click here for full report.

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