Increased consumer spending at restaurants over the next three months will pay off in same-store sales growth at major chains, especially quick-service brands, according to a recent analyst report.
In a consumer survey conducted in February by RBC Capital Markets, 14 percent of respondents said they planned to spend more in restaurants over the next 90 days, a slight uptick from the 13 percent who said the same in January.
The latest results also reflected a 7-percent improvement in the number of consumers at the same time last year who said they planned to spend more at restaurants, analyst Larry Miller of RBC said in a research note Tuesday.
Meanwhile, the number of consumers who said they planned to spend less over the next three months dropped to 24 percent in February, compared with 25 percent in January.
Miller projected that restaurant same-store sales would continue to track in the positive low-single digits over the next several months.
“Improving comp-store sales is a central tenet of our thesis, as we expect there to be a long-lasting period of comp-store sales stability due to supply reductions and traffic gains as the economy recovers,” the report said.
However, Miller said he expects surging commodity inflation to challenge the restaurant industry over the next two years.
As a result, he said, quick-service companies such as McDonald’s Corp., Yum! Brands Inc., and Sonic Corp., are more likely to reap the benefits of the improving economy because their pricing power, supply chain scale and diversified commodity baskets allow them to better cope with food inflation.
“Sales rise at fast food as franchisees raise prices and reduce discounting, and the highly franchised business provides margin protection,” Miller said.
Contact Lisa Jennings at [email protected].
