According to the National Restaurant Association’s Restaurant Performance Index (RPI), a monthly composite index that tracks the outlook for the U.S. restaurant industry, August marked the second consecutive month that the RPI contracted in key industry indicators.
The key industry indicators measure four current trends: same-store sales, traffic, labor and capital expenditures.
Restaurant operators reported a net decline in customer traffic for the first time in three months. Forty two percent of operators reported a traffic decline in August, up from 37 percent who reported lower traffic in July.
Restaurant operators reporting an increase in customer traffic decreased by three percent between August 2010 and August 2011, down from operators who reported higher traffic in July.
“Although restaurant operators reported net positive same-store sales results in August, their six-month outlook for both sales growth and the economy continued to deteriorate,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association.
Forty-five percent of restaurant operators reported a same-store sales gain between August 2010 and August 2011, while 37 percent of operators reported lower same-store sales. In July, 48 percent of operators reported higher same-store sales, while 34 percent reported a sales decline.
Additionally, according to Bloomberg Industries, alcohol consumption has declined at restaurants and bars; however, drinking at home has risen steadily since June 2009.
Overall, restaurant operators reported steady levels of capital spending. Forty-four percent of operators said they made an investment in equipment, expansion or remodeling during the last three months.
The Expectations Index, which measures restaurant operators’ six-month outlook for all four industry indicators declined by the lowest level in nearly two years, revealing uncertainty about future business conditions.
Restaurant operators’ outlook for sales growth in the coming months continues to deteriorate, and remained negative about the direction of the overall economy in the months ahead.
Only 18 percent of restaurant operators said they expect economic conditions to improve in six months, with 31 percent of operators expecting economic conditions to worsen.
Restaurant operators are somewhat positive about investment spending in the future. Almost half of restaurant operators plan to purchase equipment, expand or remodel in the next six months, up slightly from last month.
Chief Financial Officer for Yum Brands — Pizza Hut, Taco Bell and KFC chains — expects another sales drop in the fourth quarter in its struggling U.S. chains.
Yum Brands reported across-the-board sales declines in the U.S. The company’s third-quarter profit grew only because of strong sales and restaurant growth in China and elsewhere overseas.
Ruby Tuesday Inc. reports their fiscal first-quarter profit dropped 75% as the chain’s same-store sales continue to decline, and lowered its earnings forecast for the year. In the fiscal first quarter, same-store sales fell 4.1% at company-owned locations.
Darden Restaurants Inc., owner of the Olive Garden chain, said that first quarter earnings dropped 5.7 percent – even though sales improved 7.5 percent.
“Strong sales growth this quarter at Red Lobster, LongHorn Steakhouse and our Specialty Restaurant Group was offset by below expectation sales results at Olive Garden, unfavorable year-over-year commodity costs and the adverse impact of Hurricane Irene,” Chairman and Chief Executive Officer Clarence Otis said.