WASHINGTON (July 29, 2011 - PRNewswire-USNewswire)—Driven by stronger same-store sales and traffic levels and a more optimistic outlook among restaurant operators, the National Restaurant Association's Restaurant Performance Index (RPI) rose above 100 in June. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.6 in June, up 0.8 percent from May's level of 99.9. In addition, June represented the sixth time in the last seven months that the RPI stood above 100, which signifies expansion in the index of key industry indicators.
"The RPI's solid improvement in June was due in large part to stronger same-store sales and customer traffic performances, which bounced back from their May declines," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. "In addition, restaurant operators are optimistic that their sales environment will improve in the months ahead, while their outlook for capital spending also remains strong."
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, and index values below 100 represent a period of contraction for key industry indicators. The RPI consists of two components, the Current Situation Index and the Expectations Index.
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.5 in June – up a solid 1.4 percent from May's level of 99.2. The Current Situation Index stood above 100 in three of the last four months, which signifies expansion in the current situation indicators.
Restaurant operators reported stronger same-store sales results in June. Fifty-one percent of restaurant operators reported a same-store sales gain between June 2010 and June 2011, up from 39 percent of operators who reported higher same-store sales in May. Meanwhile, 31 percent of operators reported a same-store sales decline in June, down from 40 percent of operators who reported lower sales in May.
Restaurant operators also reported improving customer traffic levels in June. Forty-four percent of restaurant operators reported an increase in customer traffic between June 2010 and June 2011, up from 33 percent of operators who reported higher traffic in May. In comparison, 33 percent of operators reported a traffic decline in June, down from 41 percent who reported lower traffic in May.
Along with improving sales and traffic results, restaurant operators reported an increase in capital spending activity. Forty-eight percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, up from 44 percent who reported similarly last month.
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 100.7 in June – up slightly from May's level of 100.6. June represented the 11th consecutive month above 100 for the Expectations Index, and the modest improvement came on the heels of three consecutive monthly declines.
Restaurant operators remain generally optimistic about sales growth in the months ahead. Forty percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), essentially unchanged from 41 percent who reported similarly last month. In comparison, only 16 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, down from 20 percent who reported similarly last month.
In comparison, restaurant operators are somewhat less optimistic about the direction of the overall economy in the months ahead. Twenty-six percent of restaurant operators said they expect economic conditions to improve in six months, up slightly from 24 percent who reported similarly last month. Meanwhile, 20 percent of operators said they expect economic conditions to worsen in the next six months, compared to 21 percent last month.
Restaurant operators continue to plan for capital spending in the months ahead. Fifty percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, matching the proportion who reported similarly last month.
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.