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Holidays pose challenges for restaurants

Holidays pose challenges for restaurants

Operators face tough comparisons with 2014, but economic indicators are strong

The 2015 holiday season could be mixed for restaurant operators despite positive macroeconomic indicators going into the season, industry watchers say.

The fourth quarter opened with what was described by many as a “choppy” October. Same-store sales fell 0.2 percent, according to Black Box Intelligence data, breaking a 14-month streak of growth for the industry.

Still, the outlook for consumers is bright as they contemplate gift-giving season, with employment back to pre-Recession highs and gas prices expected to remain low.

The national unemployment rate dropped to 5 percent in October, half that of the peak during the Great Recession, according to the Bureau of Labor Statistics. The average price for regular gasoline was $2.21 on Tuesday, down from $2.93 a year ago, and the lowest since 2006, according to AAA.

Larry Miller, co-founder of the monthly MillerPulse survey that tracks industry performance, is projecting a same-store sales increase of 1 percent to 2 percent across all segments for the fourth quarter as the industry laps a difficult comparison with last year, when same-store sales climbed 4.3 percent.

Consumer indicators remain robust and two-year sales trends have been strengthening over the past few months, Miller said.

But Christmas falls on a Friday this year, which will put a damper on dining out that weekend.

On the upside, however: Hannukah comes 10 days earlier this year than in 2014, pushing the shopping season more firmly into November.

In addition, there is one extra selling day between Thanksgiving and Christmas this year, notes a report Monday by the Piper Jaffray Consumer Research Team.

And if consumers are out shopping, they’re also out eating.

The National Retail Federation, or NRF, projected retail spending will rise 3.7 percent this holiday season, while ShopperTrak, another annual forecaster, estimates a 2.4 percent increase in holiday spending.

The average between the two, however, of 3.1 percent is the lowest forecast since 2010, according to Piper Jaffray.

According to the NRF’s annual survey, consumers will spend an average of $805.65 on holiday merchandise, a few dollars more than the $802.45 spent on average last year.

That projection includes spending on everything holiday, from gifts to decorations. Of that, an average of about $107.80 will be spent specifically on food, consumed at home and in restaurants, the NRF said.

ShopperTrak expects Black Friday, or Nov. 27, to be the biggest shopping day of the year, though last year it came in second after Super Saturday, the Saturday before Christmas. This year’s shopper is more motivated by sales and a growing tendency to shop earlier, ShopperTrak said.

“This year, there are a number of retailers that are choosing to remain closed on Thanksgiving, and we expect that to compliment current trends and return Black Friday to the top spot for both sales and shopper visits,” said Kevin Kearns, ShopperTrak chief revenue officer.

Chains mark holidays with seasonal promotions

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One chain that is expected to have a merry holiday season is Starbucks.

The Seattle-based coffeehouse chain reported an 8-percent increase in global same-store sales for its Sept. 27-ended fourth quarter, saying momentum sets the brand up well for what is typically its strongest season.

Starbucks officially marks the beginning of the holidays on Nov. 10 in its U.S. stores with the switch to its cranberry-red holiday cups, the return of Christmas Blend coffee and other seasonal limited-time offers like Chestnut Praline, Peppermint Mocha and Caramel Brulée lattes.

Starbucks snowman cookie
Starbucks has introduced its holiday menu, including snowman-shaped cookies. Photo: Starbucks

Last year, Starbucks generated more than $1.6 million in card loads during the holidays and gift card sales were boosted by a promotion that offered guests an opportunity to win Starbucks for Life. That promotion will return this year for My Starbucks Rewards members.

One in seven Americans received a Starbucks gift card over the 2014 holiday season, an increase from one in eight the prior year.

Also new this year: Starbucks is offering online all of its merchandise seen in stores.

The NRF said almost half, or 46.1 percent, of all holiday shopping will be conducted online, up from 44.4 percent last year.

Gift cards remain the No. 1 most-requested gift item for the ninth year in a row, the NRF said. Nearly six in 10 consumers surveyed, or 59 percent, said they would like to receive a gift card.

The Piper Jaffray report, however, argued that chains like Del Frisco’s may have holiday “blues” this year, with fourth quarter comparable sales expected to be up 0.2 percent systemwide, reflecting a slowdown in private- and fine-dining sales.

“In holidays past, operators catering to high-end consumers and/or offering private-dining options were positioned to outperform based, in part, on what we describe as a broader higher-end recovery, a cycle that is now past its peak,” the report said. “High-end steakhouse index same-store sales and traffic have also slowed during the course of this year.”

Some brands are pushing to nail down holiday parties early.

Fleming’s Prime Steakhouse & Wine Bar, for example, is offering guests a $50 gift card for every $500 spent on private-dining events booked before Nov. 22.

One big unknown: The weather.

In the West, prognosticators say an El Niño year will bring much-needed rain to California, but also possible flooding.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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