Financing

Black Box: Weather hurts sales in January

Same-store sales declined 0.3% as storms hit the Midwest and Northeast.

Winter storms kept customers home in January, leading to a 0.3% decline in same-store sales, according to the latest index from Black Box Intelligence.

The decline was the first in four months, putting a snow-coated damper on the late 2017 industry improvement. Same-store sales slowed by 60 basis points from the 0.3% increase in December.

The biggest problem was traffic, which declined 3% year-over-year in January, slowing by 130 basis points. Average check increased 3%, despite heavy value promotions at many restaurant chains.

“On the surface, it’s disappointing,” Victor Fernandez, executive director of insights and knowledge with Black Box parent company TDn2K. “Weather was a big factor. Given all the noise, it’s not too bad.”

Fernandez, in fact, suggested that same-store sales were steady in January, roughly the same level as in December, if you factor out the Mid-Atlantic, Midwest and New England, where winter storms had the biggest impact. And that’s not including the South, which was also hurt by bad weather in January.

Weather frequently has a major impact on industry sales, as winter storms in particular can keep people inside, closing schools and keeping people from going to work.

“Overall, we believe noise from weather had a factor there,” Fernandez said. But, he added, “We can’t say sales were very strong.”

Black Box bases its index on weekly sales from 170-plus brands and 30,000 restaurants, representing $68 billion in annual revenue.

Overall, Black Box expects better sales in 2018, in part because lower taxes should put cash in more consumers’ pockets while reform gave consumers clarity heading into the year.

On top of that, consumer confidence is strong, unemployment is low, and wages are rising. TDn2K expects 3% economic growth in 2018.

“There’s reason to say we’re cautiously optimistic,” Fernandez said. “We’re turning the corner a little bit.”

“We’re seeing some gains in terms of jobs, the fact that wages are growing, all should point toward wages picking up a little bit,” he added. “We expect some better results.”

Still, many of the same challenges the industry faced the past two years, including concerns about overdevelopment, competition from outside restaurants and low inflation at grocers, are still there heading into 2018.

While Fernandez expects a better year in 2018, he doesn’t expect a strong growth year or even a growth year at all—just a year that wasn’t as bad as 2016 and 2017, when same-store sales declined by 1.1% each year.

“For us to turn around, top growth would have to pick up a lot more than it is,” Fernandez said. “It’s likely it will be a better year than it was the last two, but probably not what we’d like to see where we’re starting to see actual growth.”

And, he said, traffic will likely remain weak.

As for sectors, the best-performing concepts were in upscale casual dining and in fine dining, as experiential dining continues to thrive while business travel grows and wealthier consumers continue to spend.

And, Black Box said, casual dining had its second best month in the last year. Fernandez said the improvement wasn’t just through value and discounts, but with consumers spending more money at the restaurants, as average check improved during the month.

“They’re probably, finally, gaining some ground in terms of sales,” Fernandez said. “It was a good month.”

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