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MillerPulse: Storms, continued traffic woes hurt September same-store sales

Chains have no one to blame for ongoing traffic troubles but themselves

Same-store sales declined 0.6 percent in September, according to the latest MillerPulse index, as Hurricanes Irma and Harvey put pressure on sales in major markets.

Larry Miller, cofounder of the monthly restaurant same-store sales report, said that storms hurt same-store sales by 40 basis points in both August and September, respectively, when storms pounded major markets in Texas and Florida. 

But even without the storm effects, he said that the results are still weak. Same-store sales remain historically low, declining for 13 of the past 16 months as the restaurant industry faces its worst period since 2009.

On a two-year basis, same-store sales fell 0.9 percent. Two-year same-store sales, which factor out one-time events like weather, have been down three of the past five months. “The last two years are some of the weakest years on record, other than the recession,” Miller said. 

Industry same-store sales peaked at 5.3 percent in January 2015. They’ve been gradually slowing ever since.

The issue is mostly traffic, meaning restaurants are luring fewer customers. Same-store traffic declined 2.3 percent in September — the 19th straight monthly decline and the 29th decline in 32 months.

Declining same-store traffic suggests consumers are either not dining out as much as they once did, or it suggests that they’re opting for something else. A number of analysts, including Miller, believe it’s the latter.

He says aggressive expansion has increased supply at a rate faster than demand, spreading the same number of customers over a growing number of locations. “From 2011 to 2016, you’ve had five years of substantial unit growth expansion,” Miller said.

Restaurant customers continue to shift their spending toward quick-service restaurants, but both full-service and limited-service concepts were weak.

Same-store sales at fast food restaurants increased 0.3 percent, and traffic declined 2 percent. At casual dining chains, same-store sales declined by 1.7 percent on a 2.5-percent decline in traffic.  Same-store traffic at casual-dining chains has been down all but four months since 2012.

Miller believes restaurants could improve their results by showing some “restraint” on construction. 

“There’s always going to be guys growing,” Miller said. “Show some restraint. If the industry an manage [unit] growth below 2 percent, that seems to be the number the industry can handle and you see broader success.” 

Contact Jonathan Maze at [email protected]

Follow him on Twitter at @jonathanmaze

TAGS: Finance
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