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Black Box: 3Q same-store sales best in 3 years

But restaurants continue to lose customers as traffic declined yet again.
Photograph: Shutterstock

Same-store sales rose 1.2% in the third quarter, according to the latest Black Box Intelligence Index, the best performance in three years as the restaurant industry shows signs of life.

But that improvement came from higher prices and consumers buying more expensive items. Restaurants continued to lose customers in September, even if the decline is not quite as bad as it had been.

“Overall we’re seeing a restaurant industry that is a bit stronger than it was a year ago,” said Victor Fernandez, vice president of insights and knowledge for TDn2K, parent company of the Black Box index. “We do see some signs of recovery in some areas.”

But, he said, “It’s all about a relative recovery. We’re doing better, but the industry is far from growing in a healthy manner.”

Same-store sales rose 1.2% in September, finishing a quarter with three positive months for the first time since 2015. That was also the last time the industry experienced quarterly same-store sales better than 1.2%.

Some of the improvement is due to easier comparisons. Same-store sales in Florida and Texas were down 3% in the third quarter of a year ago, so better sales were expected to a degree, though September did see Hurricane Florence soak the Carolinas.

But Fernandez noted that all regions in the country were positive in the third quarter, again the first time that’s happened in three years. “It’s not just Texas and Florida,” Fernandez said. “Everybody is doing better.”

Still, traffic fell 1.4% in September. And it fell 1.2% in the third quarter.

The numbers are even worse when analyzed on a two-year basis: Third quarter same-store traffic is down 5.7% over the past two years.

“We’re not close” to positive traffic, Fernandez said. “Even in the best quarter we’ve had for traffic, it’s not even approaching flat growth. It’s still firmly in negative territory.”

The weak traffic is disconcerting, given the state of the economy, with an unemployment rate below 4%. But too many restaurants have made the competitive environment too challenging for many companies, leading to generally weak same-store sales and falling traffic.

Joel Naroff, president of Naroff Economic Advisors and TDn2K’s economist, said that household income hasn’t grown as much as would be required to generate more spending growth. Firms seem intent on raising benefits, rather than wages, which has retrained spending.

Comparisons also get tougher toward the end of 2018, which could keep same-store sales growth to a minimum.

Still, retailers are expecting a strong holiday, and continued economic expansion could help generate some sales growth toward the end of 2018.

“There’s some strength in the economy that should carry through,” Fernandez said. “There are some small positives to hold onto throughout the rest of the year.”

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