The Big News February 2009
-
Sales and traffic levels continued to weaken, Operators' outlook remained pessimistic The outlook for the restaurant industry continued to weaken in December, as the National Restaurant Association's comprehensive index of restaurant activity fell to another record low. The Association's Restaurant Performance Index (RPI) - a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry - stood at 96.4 in December, down 0.2 percent from November and its 14th consecutive month below 100.
"The December decline in the Restaurant Performance Index was the result of a drop in the current situation component," said Hudson Riehle, senior vice president of Research and Information Services for the Association. "Same-store sales results were the softest in the history of the Restaurant Performance Index, with nearly two-thirds of restaurant operators reporting lower sales in December."
"The weak economy and declining sales continue to weigh on the minds of restaurant operators," Riehle added. "Forty-five percent of restaurant operators said the economy is the number-one challenge facing their business, followed by building and maintaining sales volume at 27 percent."
The RPI is based on the responses to the National Restaurant Association's Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor and capital expenditures. The RPI consists of two components - the Current Situation Index and the Expectations Index. (Follow this link to view this month's report).The RPI is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction for key industry indicators.
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 95.7 in December - down 0.5 percent from November and its lowest level on record. In addition, December marked the 16th consecutive month below 100, which signifies contraction in the current situation component.
Restaurant operators reported negative same-store sales for the seventh consecutive month in December. Only 23 percent of restaurant operators reported a same-store sales gain between December 2007 and December 2008, down from 26 percent who reported a sales gain in November. Sixty-six percent of operators reported a same-store sales decline in December, up from 60 who reported negative sales in the previous three months and the highest level on record.
Customer traffic levels also dropped off in December. Sixteen percent of restaurant operators reported an increase in customer traffic between December 2007 and December 2008, down from 18 percent who reported similarly in November. Sixty-eight percent of operators reported a traffic decline in December, the highest level on record.
Capital spending activity in the restaurant industry deteriorated along with sales and traffic in recent months. Thirty-four percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the lowest level on record.
The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 97.2 in December - up slightly from November's level of 97.1. In addition, December represented the 14th consecutive month in which the Expectations Index stood below 100.
Restaurant operators are more pessimistic about sales growth in coming months. Only 18 percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 21 percent who reported similarly last month. Forty-eight percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, matching the proportion who reported similarly last month.
Restaurant operators also remain uncertain about the direction of the economy. Seventeen percent of operators expect economic conditions to improve in six months, matching the proportion who reported similarly last month. Forty-one percent of operators said they expect economic conditions to worsen in six months, down from 49 percent who reported similarly last month.
Restaurant operators continue to cut back on plans for capital spending. Thirty-seven percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 40 percent who reported similarly last month and matching the lowest level on record.
While the RPI is released on the last business day of each month, more detailed data and analysis can be found on Restaurant TrendMapper (www.restaurant.org/trendmapper), the Association's subscription-based Web site that provides detailed analysis of restaurant industry trends.
Restaurant Industry Outlook Softens as the Restaurant Performance Index Fell to a Record Low in December