The snow and ice of February has thwarted hopes of a strong first quarter for the restaurant industry, throwing a wrench into forecasts for a better year ahead, according to the latest NRN-MillerPulse report.
February same-store sales rose 0.1 percent industrywide, the same results as in January, according to the March report. The monthly results were particularly disappointing given easy comparisons with February 2013, when same-store sales fell 1.8 percent.
As a result, the two-year same-store sales trends showed a 1.7-percent decline, the lowest in three and a half years, the report said.
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The good news for the restaurant industry is that spring is coming. According to the report, 44 percent of operators say their sales are at or above their expectations in places where the weather hasn’t been a factor, said Larry Miller, founder and chief executive of the monthly MillerPulse report.
The bad news: It’s not likely the industry will see the 2-percent sales growth that had been predicted for 2014, which was based in part on hopes of strong first-quarter performance, reflecting easy comparisons. If sales trends continue as is, the annual forecast could show a 1.0-percent decline, or worse than 2013’s 1.1-percent growth, Miller said. “Fortunately, that’s an overly bearish view, since sales are likely to rebound as the weather improves,” he added.
Still, more difficult comparisons also lie ahead, according to MillerPulse. “Weather’s already damaged our forecast, which now calls for industry same-store sales of flat to up 0.5 percent for the year, unless business accelerates meaningfully,” the report said.
Same-store sales within the fast-food segment increased 2.3 percent in February, rising from January’s increase of 1.5 percent. Guest traffic, however, declined by 0.3 percent for the month.
Casual-dining same-store sales fell 1.0 percent in February following a 0.3-percent decline the prior month. Traffic fell 2.3 percent for the segment.
Fast-casual restaurants recorded a 0.5-percent increase in same-store sales, rebounding from the 0.3-percent decline in January. As with the other segments, traffic was negative, falling 1.8 percent.
Assuming March’s lion-like weather early in the month will transform into the expected lamb with the arrival of spring, the outlook for sales will also improve, the report said.
Sixty-five percent of operators surveyed said they expect better sales in March compared with 23 percent who expect worse. Of course, Miller notes, expectations for February were also optimistic, when operators were surveyed in January. But the weather did not cooperate.
Though guest traffic was negative across all segments in February, trends did show an improvement. Industrywide traffic fell 1.4 percent for the month versus a 2.2-percent decline in January.
The outlook for margins was also upbeat: 43 percent of operators surveyed said they expect margins will improve over the next six months, while 16 percent of them expect them to worsen. In February, industry margins were 15.6 percent, rising 180 basis points compared with January.
Expectations for commodity inflation ahead, however, rose slightly. Operators said they expect inflation of 2 percent over the next six months. In January they said they expected an increase of 1.9 percent.
The latest NRN-MillerPulse survey contained responses from more than 25,000 restaurant locations representing all regions of the U.S. and all segments of the industry, including fast food, fast casual, casual dining, and fine dining.
Restaurant chains and operators interested in participating in the MillerPulse survey for additional results and insights can register at MillerPulse.com.