Financing

Black Box: Sales rose in May, but traffic still down

Same-store sales improved from April’s weakness, but fears of an economic slowdown loom.
Photograph: Shutterstock

Same-store sales rose 1.1% in May, according to the latest Black Box Intelligence index, as the industry’s up-and-down spring continued.

But traffic continued its years-long weakness. Same-store traffic declined 2.1%, and while that was an improvement from April’s numbers, it shows that restaurants continue to get by with higher check averages rather than from new customers.

Industry sales have shifted and moved from month to month this year, driven largely by external factors such as weather and calendar shifts. Sales were weak in February amid bad weather, improved in March and then declined in April—months likely influenced by a shift from Easter.

Victor Fernandez, vice president of insights and knowledge for Black Box parent company TDn2K, Dallas, noted that the month was “relatively free of external factors,” which have “muddled the results in recent months.”

Outside of those factors, the industry has settled into a period of sales growth without new customers as restaurant chains raise prices and focus on more premium items to generate profit margins.

Fernandez noted that two-year same-store sales growth has been positive for seven of the past eight months, with only the weather-influenced month of February changing that.

At some point, however, restaurants will need to get back to traffic growth. The industry has struggled for four years to get customers into its restaurants, a problem likely due to a combination of factors, such as retail weakness, overall industry saturation and price differentials with grocers.

One potential problem: The economy.

There are growing concerns that the years-long run of economic growth is nearing an end amid trade disputes and other issues.

“After growing strongly for nearly a year, the economy has entered a period of significant uncertainty,” Joel Naroff, president of Naroff Economic Advisors and an economist for TDn2K, said in a statement. He said the uncertainty comes from the escalation of the use of tariffs to restrict exports from China as well as Mexico.

He added that businesses’ concerns about tariffs are “restraining capital investments.”

Still, “the economy is not faltering,” Naroff said, noting that the outlook is for the economy to keep growing at a more modest pace.

The Black Box index is based on weekly sales reports from more than 170 restaurant brands that operate more than 31,000 locations and generate nearly $72 billion in annual sales.

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