US Restaurant Industry Has Its Worst Run Since 2009
I’ve posted a lot of stories recently on the decline of the US retail industry. Every week, it seems like a new major retailer is shuttering stores or warning of an upcoming bankruptcy. Maybe it’s now time to also start fearing for the health of the restaurant industry?
One month after we reported that the “restaurant industry hasn’t reported a positive month since February 2016“, we can add one more month to the running total: according to the latest update from Black Box Intelligence’s TDn2K research, in June both same-store sales and foot traffic “growth” declined once more, dropping by -1% and -3%, respectively, extending the longest stretch of year-over-year declines for the US restaurant industry to 16 consecutive months – the longest stretch since the financial crisis – with sales rising in 45 markets while declining in 150 with Texas, the worst region in the US, suffering a 2.2% and 4.1% decline in sales and traffic respectively.
As Black Box adds, “bad news is same-store sales and traffic growth were still negative in June and the second quarter of 2017; and year-over-year, same-store sales have been declining for the last six consecutive quarters.”
While there was some offsetting “good news”, namely that “June results were the best for the industry for both sales and traffic growth since January” – in other words a 3% decline in traffic is now spun as “good” – it may have been due to a calendar effect and certainly was not enough to offset growing concerns about the relentless deterioration in the space.
“This is likely the result of a combination of factors,” commented Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K. “While economic indicators have been pointing to some improved conditions this year, the reality is that we are also lapping over some weak results in 2016 which make the comparisons much easier for the industry in 2017.”
Meanwhile, in a potential threat to the likes of McDonalds and Shake Shack, quick service, which was the top-performing segment in 2016 and was among the top three segments in 2015, is now struggling to keep up building on that rapid growth. The segment has now experienced three consecutive quarters of negative same-store sales growth, although one wouldn’t know it by looking at McDonalds’ share price.