Rising gas prices, an increasingly cited concern among restaurant operators, have yet to significantly impact sales, according to a recent survey.
The U.S. average price of regular gasoline was $3.93 per gallon on Wednesday, according to AAA’s Daily Fuel Gauge report, up nearly $1.07 from the $2.86 a gallon a year ago. Restaurant executives have worried that these higher prices at the pump would put a damper on consumer spending.
However, most respondents to a survey conducted by Robert W. Baird & Co. reported high fuel costs had little to no effect on April sales, and the firm is projecting improving sales trends for May.
In a survey of executives at 51 chains, including private companies and franchisees of publicly traded restaurants, 58 percent of respondents said gas prices had only a minor impact on sales last month, while 30 percent reported no impact at all. Twelve percent reported high fuel costs had a major impact on sales.
“Most restaurant companies we talk to, both private and public, are concerned about high gas prices, but I don’t think they’ve seen a material impact on demand trends yet,” David E. Tarantino, a Baird securities analyst, said in an interview with Nation’s Restaurant News.
“There are other factors that are helping consumer spending and offsetting the negative impact from gas prices,” he said. “That’s what we’ve seen over the past few months. Even as gas prices have gone higher, you have seen spending in restaurants improve from levels we saw even at the end of last year.”
The Baird survey also reported on April sales trends. Those results, by restaurant segment:
• Casual dining: 22 percent of those surveyed reported same-store sales improvement in April, compared with March, while 38 percent saw weaker comp sales. Forty percent reported no change from March to April.
• Fast casual: 23 percent saw improvement in April same-store sales over March results, 67 percent reported slower trends, and 10 percent saw no change.
• Quick service: 61 percent experienced better same-store sales in April, and the rest, or 39 percent, saw softer comps.
“The April survey that we conducted really is a continuation of the theme that we have seen over the past year or so, with gradual improvement in demand trends as the economy gets a little better versus low levels,” Tarantino explained. “It’s certainly not a robust economy, but some improvement from the low levels of last year is leading to better trends. … As jobs are added and as consumer confidence gets a little better, spending in restaurants can get better as the year moves on.”
Sales trends for May are projected to be about 50 basis points better than in April and ahead of first quarter figures, Baird projected. The report also noted that high commodity costs continue to be the chief concern for restaurants.
“Interestingly, the 2011 profit outlook for the chains in our survey, on average, has not changed much versus expectations at the start of the year, as the benefit from stronger-than-anticipated top-line trends has been offset by higher commodity costs,” the report said.
Tarantino added in the interview: “We’re cautiously optimistic about the outlook. We don’t think the earnings growth outlook is necessarily robust for everyone, but we think some companies are in a good position to grow earnings and grow revenue this year and into next year.”