Same-store sales slowed to their lowest levels of the year in October, according to the latest MillerPulse report, as both casual-dining restaurants and quick-service chains struggled to generate traffic.
Same-store sales rose 1.7 percent during the month, according to the monthly index.
Yet Larry Miller, co-founder of the survey, noted that same-store sales rose 4.7 percent on a two-year basis, relatively consistent with the past eight months, although they fell from the 5.2-percent two-year trend in September.
“On balance, October looks bad, but isn’t that bad,” Miller said. “The reason it looks bad is we had the lowest rate of growth in any month during 2015. On the surface, it sounds pretty scary. But when you dig a little, business trends slowed down a little bit, but they’ve been within a tight range the past four or five months.
“Business is holding its own against tougher comparisons.”
Still, the restaurant industry has struggled to generate consistent traffic growth all year, and October was no different. Traffic fell 0.8 percent for the month, declining 0.4 percent at quick-service restaurants and 1.3 percent at casual-dining outlets.
Traffic has been positive only four months this year. “Economically speaking, we’ve been doing pretty good all year,” Miller said. “We added a lot of jobs. We’ve seen wage growth, and we’ve had cost of living relief. Yet there hasn’t been a material uptick in restaurant traffic. You wonder if there’s too many restaurants.”
The decline in traffic means that restaurants have been generating sales largely through growth in average check.
This is particularly true for casual-dining restaurants, which generated 1.7-percent same-store sales growth and saw traffic decline 1.3 percent.
The higher check isn’t coming from higher prices, Miller said. So casual-dining chains are getting customers to spend more, but they’re not coming in as often.
Consumers are ramping down their spending somewhat, especially at quick-service restaurants, where same-store sales slowed to 1.6 percent from 3.2 percent the month before.
Quick-service chains have been using discounts more often to get customers in the door. Burger King has been getting sales through discount strategies. And Wendy’s recently introduced a 4-for-$4 promotion, offering a Jr. Bacon Cheeseburger, chicken nuggets, small fries and a drink for $4.
McDonald’s, meanwhile, is rolling out a 2-for-$2 McPick menu in January.
“We’re starting to see a lot more value promotion,” Miller said. “People are anecdotally complaining about the level of discounting.”
Still, for the most part, Miller said that tougher comparisons in October were the reason for the slowdown. That’s dim news heading into the next few months when that difficulty intensifies — particularly in December, when same-store sales rose 4.3 percent a year ago, and January, when sales rose 5.3 percent.
“The first half of 2016 is not going to be easy,” Miller said.
Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze