Same-store sales rose 0.8% in March, according to TDn2K's latest Black Box Intelligence index, as the restaurant industry shows signs of creeping out of a two-year slump.
But same-store traffic still fell 2.1%, meaning that the industry has a way to go to lure more customers into its doors.
Still, March numbers represent a modest rebound over disappointing January and February numbers, and led to a slight, 0.1% increase in same-store sales for the first quarter, the second-straight positive quarter following a 0.4% increase in the fourth quarter of 2017.
Industry same-store sales have now grown in four of the past six months.
“We’re getting some clarity as to where we are in the industry,” says Victor Fernandez, executive director of insights and knowledge for TDn2K. “There’s some strength, and some positive sales growth. We have some positive momentum, a pickup in consumer spending and strength in the industry.”
Industry same-store sales weakened from the start of 2015 through the third quarter of 2017, as grocers reduced prices and the industry became saturated with locations beyond existing demand.
In addition, consumers shifted their dining habits, eating more frequently at grocers or convenience stores, or they dined at independents or small chains. The declines came despite a strong economy, with lower unemployment, low gas prices and rising consumer confidence.
Weak traffic suggests consumers still aren’t rushing back to their local restaurants. “We keep losing guests to dining occasions outside of restaurants,” Fernandez says.
But he believes the industry “hit rock bottom” last year and is now coming back. “This was the first time we’ve had two consecutive quarters of positive same-store sales since 2015,” he says. “Even if it’s a small uptick, I’ll take positive over negative any day.”
He says there was an increase in average check, suggesting that consumers are feeling confident and are willing to spend more.
Fernandez also says that same-store sales picked up in many categories, with fine dining and upscale casual dining the strongest.
“Consumers are willing to go and spend more for the restaurant experience,” he says.
But casual-dining and fast-casual chains also improved, Fernandez says: “Casual dining has now seen some positive growth for two consecutive quarters.”
One potential factor in same-store sales this year could be tax cuts. Consumers should start seeing lower taxes in their paychecks. Over time, that could translate into higher sales.
“The consumer may be coming alive again after being somewhat dormant during the early winter,” Joel Naroff, president of Naroff Economic Advisors and TDn2K’s economist, said in a release. He said vehicle sales rebounded in March, credit card debt rose and retail sales look “solid.”
“In part, the rise is being funded by the slow-but-steady impact of the tax cuts,” he said. “But more fundamentally, wage gains are accelerating as well. Personal income is increasing, providing the capacity to spend more.”
One of the big challenges in the U.S. restaurant industry, however, is supply, which still appears to be constraining same-store traffic despite the improving economic numbers. Traffic in the first quarter declined 2.7%.
“Overall, we’re oversupplied,” Fernandez says. While consumers are willing to spend more money, they’re choosing to spend that money at different places and “not at chain restaurants,” he says.
“The industry will have to solve that problem,” Fernandez says.
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