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NRA: Operator optimism at 2-year high

WASHINGTON The National Restaurant Association’s monthly Restaurant Performance Index hit a 22-month high in December, driven by improving sales and traffic trends, as well as operator optimism that hit its highest level in two years.

The NRA’s index, or RPI, is a composite look at the industry’s health based on operator results and monthly surveys. It tracks restaurant industry same-store sales, traffic, labor and capital expenditures, and is based on a 100-point scale, with results above that level signifying growth, and results below signifying contraction. It consists of two components, the Current Situation Index and the Expectations Index.

In December, the index reached 98.7, a 0.9-percent uptick from November, according to the NRA’s report released Friday. Below the 100 mark, however, the result represented the 26th consecutive month of industry contraction.

Still, a greater percentage of restaurant operators reported gains in same-store sales and guest traffic compared with the prior month, while a decreasing share of operators complained of erosion in those areas, the NRA said. Operator expectations for rising sales and improved economic trends in the next six months also improved.

“The RPI’s strong gain in December was the result of broad-based improvements among several index components,” said Hudson Riehle, senior vice president of the NRA’s research and knowledge group. “Although restaurant operators continued to report a net decline in same-store sales and customer traffic, both registered their strongest performances since the summer of 2008.”

Riehle noted that operator expectations for business performance during the next six months also improved. “More than a third of restaurant operators expect to their sales to improve in six months, the highest level in more than two years,” he said.

Indeed, the Expectations Index, which measures restaurant operators’ six-month outlook, stood at 100 in December. The NRA noted that number was up from 99.6 in the prior two months and represented the first time in eight months that the Expectations Index reached the 100 level, meaning that restaurant operators were no longer pessimistic about the six-month outlook for the industry.

Thirty five percent of restaurateurs surveyed by the association expect to have higher sales in six months, compared with the same period in the previous year, up from 31 percent in November. The NRA said that percentage was the highest in more than two years. In comparison, 21 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, down from 24 percent last month.

Operators are also feeling better about the direction of the economy, the NRA said, with 34 percent saying they believe conditions will improve during the next six months and 18 percent saying they expect conditions to deteriorate. In comparison, last month 27 percent of respondents forecasted an improving economy, while 19 percent predicted problems ahead.

The RPI’s Current Situation Index ­was 97.3 in December, up 1.4 percent from November and at its highest level since August 2008, the NRA said.

While the 19th consecutive month of negative same-store sales reports by surveyed operators, December saw dramatic improvements, NRA sources said. Among operator respondents, 35 percent reported a same-store sales gain between December 2008 and December 2009, compared with 24 percent who reported year-to-year gains in November. Conversely, 49 percent of operators reported a same-store sales decline in December, down significantly from 65 percent who reported negative comparable trends in November.

On the traffic front, 30 percent of the responding operators said customer counts increased between December 2008 and December 2009, up from 21 percent in November. The NRA said 47 percent reported a traffic decline in December, down from November’s 62 percent.

In another important measure included in the index, the percentage of operators who said they had made a capital expenditure for equipment, expansion or remodeling during the past three months fell from 33 percent in November to 31 percent in December. NRA officials said December’s number represented the lowest level on record for such expenditures.

The percentage of surveyed operators who plan to make such a capital expenditure during the next six months declined from 41 percent in November to 39 percent in December.

Contact Alan Liddle at [email protected].

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