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Hurricane Harvey Spencer Platt/Getty Images News/Getty Images

MillerPulse: Harvey hit August restaurant sales hard

The industry was already paying a heavy price for expansion before the hurricane

Restaurant traffic declined in August, according to the latest monthly MillerPulse survey, as Hurricane Harvey added to an already long list of issues afflicting industry sales.

Overall, August same-store sales declined by 0.9 percent, the 12th decline in 15 months, and wider than July’s 0.2 percent drop, according to the MillerPulse data.

Traffic fell 3 percent, the steepest decline since April.

Harvey definitely had an impact on August results, MillerPulse co-founder Larry Miller said. He suggested that the storm and resulting floods hurt same-store sales by about 40 basis points.

“It’s still weak overall,” Miller added, pointing out that total same-store sales fell about 50 basis points, factoring out the hurricane. Same-store sales have been down industry-wide for some time; traffic has now fallen for 18 straight months and 22 of the past 23 months. 

Miller suggested that the industry is paying the price for aggressive expansion after the recession, as investors poured money into growth chains and executives pushed to add new units as sales began to improve.

Yet demand hasn’t been there for the number of new locations.

“They built a lot of restaurants after the recession as things started improving,” Miller said. “Demand was never that strong when you built those units. Now you’ve seen regression toward the mean. That’s going to take some time to work itself out.”

Same-store sales could nevertheless turn positive in the last three months of the year, Miller said, but that would likely be due to easier comparisons, as sales were weak at the end of 2016.

The biggest problem in the industry in August was casual dining, where same-store sales fell by 2.3 percent at dine-in chains, and traffic fell by 3.8 percent.

Meanwhile, quick-service chains were flat during the month, while quick-service traffic declined by 2.5 percent.

Miller said those results are consistent with hurricanes, as quick-service chains tend to get a boost in customers from cleanup efforts while casual dining bears a bigger brunt of the loss.

The sales results in August could foretell further problems in September, given the sizable impact of Hurricane Irma on Florida.

Yet Miller noted that while many restaurants closed during the storm, and many remain without power, others are seeing a boost in business from visitors working on the recovery. Miller himself is a Florida resident. 

“From an anecdotal view, that I can see, it looks to me like all the restaurants that have power and are open are killing it right now,” Miller said. “I wouldn’t be surprised if there’s less impact from Irma.”

Contact Jonathan Maze at [email protected]

Follow him on Twitter at @jonathanmaze

TAGS: Finance
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