Restaurants’ summer slump continued in August as same-store sales fell for the second consecutive month, while traffic was still a major problem, according to the latest Black Box Intelligence Index.
Same-store sales declined 0.7%, according to the index, which compiles data from more than 170 brands and 31,000 locations. The index is published by restaurant industry consulting and information firm TDn2k.
Victor Fernandez, vice president for insights and knowledge at the firm, said that same-store sales were still up 1.2% on a two-year basis in August, meaning the slump isn’t as bad as it seems and is as much related to tougher comparisons than anything.
Still, traffic declined 3.9%, similar to the 4% decline in July, and continuing a long string of bad traffic numbers.
“The industry’s performance has held up in recent months from a longer-term perspective,” Fernandez said in a statement. “But in this world of persistently eroding guest traffic, strong year-over-year sales growth is simply not possible every year. A period of strong sales growth such as 2018 should be expected to be followed by a softer year.”
To be sure, intense competition from certain sectors has pulled sales and traffic away in recent years. And the industry is largely considered overbuilt, which has hurt same-store traffic at numerous chains.
Restaurants have generated sales growth instead by either raising prices or by focusing on more premium items, shifting away from the discounts traditionally used to get customers in the door. Such discounts haven’t worked quite as well recently as they have in the past, and profitability concerns have shifted operators’ focus toward higher-end items.
Indeed, one segment that continues to outperform is fine dining. Numbers from such higher-end chains were not available, but Black Box said the sector did better than any other sector it measures—suggesting that business travel continues to be strong while higher-end consumers are feeling flusher.
How long that lasts remains to be seen. While the labor market is still strong, there are growing recessionary concerns thanks to a lingering trade war between the U.S. and China. A recession, of course, would be bad for restaurant sales, an especially worrisome problem given the existing state of traffic.
“The trade battle between the U.S. and China is creating enough collateral damage that there are now worries that a global economic slowdown is nearing,” Joel Naroff, president of Naroff Economic Advisors and TDn2K economist, said in a statement. “The U.S. economy continues to expand, but with new tariffs being imposed and more possible, the future is uncertain.”
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