Restaurant operator outlook on sales, margins is clouded

Restaurant operators said expectations for the next six months have been soured by declining sales trends in July and August and rising commodity costs that are pressuring results, according to the latest MillerPulse restaurant operator survey.

Restaurant industry same-store sales dipped from June to July — but remained positive at an increase of 2.1 percent — and are expected to continue to deteriorate as the year progresses. The slowed sales combined with rising food costs amid the drought [6] led operators to say that sales and profit margins over the next six months will be severely pressured.

According to the latest MillerPulse survey, which polls operators on their expectations for sales and margins, the operator outlook for same-store sales results in the coming months was one of the worst on record. After five months of positive expectations surrounding profit margins, more operator respondents now feel the margin outlook for the next six months is worse than expected. In addition, 62 percent of respondents said commodities were their top concern, trumping the weak economy and health care costs for the first time in months.

“Here’s the bad news: Operators’ outlook for same-store sales was worse for both August (lowest in seven months) and for the next six months (among the worst on record),” said Larry Miller, restaurant securities analyst at RBC Capital Markets and creator of the monthly MillerPulse surveys.

“Worse yet, commodity [inflation] expectations for the next six months shot up, likely due to the drought, and future restaurant margin expectations returned to negative territory for the first time in five months,” he said.

MillerPulse is an operator survey exclusive to Nation’s Restaurant News. The July survey included respondents from 63 restaurant operators in August regarding July sales, profit trends, performance and outlooks. Respondents included operators from all regions of the country that represent the quick-service, casual-dining, fine-dining and fast-casual segments. Those surveyed in August represented restaurants that booked about 22 percent of total industry sales.

The survey found that restaurant industry same-store sales rose 2.1 percent in July, versus a 3-percent increase in June. Monthly same-store traffic results fell 0.3 percent.

At quick-service restaurants, same-store sales increased 2.6 percent in July, compared with an increase of 3.6 percent in June. Traffic was flat, according to the survey.

At full-service restaurants, same-store sales increased 1.3 percent in July versus an increase of 1.7 percent in June. Traffic fell 0.7 percent.

Contact Sarah E. Lockyer at [email protected] [7].
Follow her on Twitter: @slockyerNRN [8]