QSR Magazine: Restaurants Still Experiencing Weak Sales

Despite a slight improvement in May restaurant sales, the industry has still not returned to positive territory. Sales were -0.3 percent a—0.

7 percent improvement from April. May was the third consecutive month of declining sales, which have continued to slide since the fourth quarter of 2015. The average growth rate for the last eight months is -0.

2 percent, with only three positive months during the period seeing modest growth of roughly 0.5 percent. This insight comes from data reported by TDn2K’s Black Box Intelligence through The Restaurant Industry Snapshot, based on weekly sales from over 24,000 restaurant units, 120-plus brands, representing $64 billion dollars in annual revenue.

Same-store traffic was down -2.7 percent in May. Despite the large drop, this was a 0.8 percent improvement from April, which saw the worst sales and traffic performance in over two years.

“The industry faced much different consumer behavior in the first half of 2016,” says Victor Fernandez, executive director of Insights and Knowledge for TDn2K. “As a comparison, guest counts fell only by an average -0.5 percent in the first five months of 2015 while restaurants were able to engineer strong check increases of roughly 3.1 percent. Today, the industry struggles as traffic was down -2.6 percent in the first five months of 2016 and average guest checks grew at a much more moderate 2.3 percent.”

“The May employment report was surprisingly weak, but it should not be taken as a signal that the economy has slowed sharply or that consumers will stop spending,” says Joel Naroff, president of Naroff Economic Advisors and TDn2K economist. “The pressures on the labor market are still building, despite the slowing in hiring. That bodes well for income growth.

In addition, consumers remain confident about the future. Rising income and confidence imply that household spending should improve as we go through the summer. Indeed, projections are for a strong summer travel season that should lead to increased traffic at restaurants.”