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Black Box: Same-store sales stumbled in April

Traffic continued to decline as restaurants relied again on higher average check to generate sales.
Photograph: Shutterstock

Restaurant chains continued to rely on higher check averages, and not more customers, to generate sales in April.

That is according to the latest Black Box Intelligence Index, which said that same-store sales declined 0.4% in April—the second such decline in three months.

Traffic fared worse, down 3.5%. That was a 1.6% deceleration from March and continued the industry’s pattern of customer loss at existing restaurants.

Victor Fernandez, vice president of insights and knowledge for Black Box parent company TDn2K, said in a statement that the month isn’t quite as bad as it looks.

For one thing, Easter was an issue as many restaurants receive fewer visits and some were closed altogether. Easter was in April this year and in March last year—same-store sales declined 2% during Easter week, according to Black Box. That also subsequently means March’s 1.2% same-store sales increase was somewhat elevated.

And Fernandez noted that the industry is coming off a notably difficult comparison from a year ago. “The two-year growth rate of 0.9% still reflects a growing industry,” he said, noting that all months since October, outside of a weather-impacted decline in February, had positive, two-year numbers.

The index comes from the Dallas-based TDn2K, which uses a database that features 300 companies that generate nearly $72 billion in annual revenue.

While Fernandez said it’s too early to suggest that the industry might be slowing down again, it does come as more chains shift away from traffic-generating value deals as costs for things like labor and rent continue to increase.

Chains such as McDonald’s, Wendy’s, Habit Burger and the Mexican fast-food chain Del Taco saw traffic declines as their average check increased. Black Box noted that average check has been accelerating since the fourth quarter of last year—banking on a confident consumer that may be more willing to buy more at restaurants.

Yet, while the economy expanded in the first quarter, there were some warning signs that could portend to a softer year.

Joel Naroff, president of Naroff Economic Advisors and TDn2K’s economist, noted that growth in consumer spending the first three months of the year was its weakest in four years. And annual growth in sales at restaurants also declined.

“Is the softening worrisome? Maybe not,” he said in a statement. “Incomes are still expanding moderately, consumer confidence is high and job gains remain strong. Thus, personal income is solid enough that restaurant sales should improve.” He said that the rebound in demand that began last year is moving back toward “sustainable levels.”

Still, the continued decline in traffic suggests an industry that remains beset by concerns of oversaturation. Restaurant chains have added numerous units over the past decade, and in recent years have expanded at rates further than consumers’ willingness to dine out more frequently—thus hurting same-store traffic.

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