Anyone still denying the viability of casual dining circa 2021 is likely to be shamed into silence by last week’s financial downloads from several of the segment’s major players.
The big brands handily blew past pre-pandemic sales levels in July, generating same-store results that looked as if a decimal point might’ve been misplaced. Texas Roadhouse posted a 25.5% increase over the 2019 intake of company stores. Outback Steakhouse parent Bloomin’ Brands reported a gain of 11.2% for its main chain, a 37.5% leap for sister brand Fleming’s Prime Steak & Wine Bar, and a 23.3% jump for Carrabba’s Italian Grill.
The Cheesecake Factory enjoyed a two-year comp gain of 10%.
The rebound of BJ’s Restaurants was more moderate, but the 212-unit multiregional brand is still outstripping the sales levels of two years ago by 1.6%.
To a chain, the operations attributed their strong summertime performance to a combination of pent-up demand for dining out, only slight erosion of off-premise sales, and the end of capacity restrictions.
Several noted the beneficial impact of consumers receiving a new roundup of financial aid from the federal government—presumably the Biden administration’s pre-payment of an elevated per-child tax credit.
“We had one location that did $100,000 in sales on Mother's Day with just 50% indoor dining capacity,” David Overton, the CEO and founder of The Cheesecake Factory, told investors with noticeable delight. The company’s president, David Gordon, noted that the upswing in sales has put the high-end chain on track to hit $12 million in annual sales per unit.
It remains to be seen if the strong upshift in sales will continue into late summer and the fall, when out-of-work consumers will lose their sweetened unemployment benefits and dining out again will be less of a novelty.
There’s also considerable tea-leaf reading about the rise in COVID-19 infections from the delta strain of the coronavirus.
But so far, so good, executives commented. “We have not seen really any changes in our business right now despite some of the increases on the delta variant,” BJ’s president Greg Levin told financial analysts. “Even in Southern California, where, at least in the Los Angeles area, mask mandates have come back into place, we haven't seen the change in the positive comp sales trends.”
The sector’s issues have shifted from the top line to items lower on their P&Ls, all the way to the operating income line. Margins are being squeezed considerably by escalating food and labor costs, with little relief in sight.
Texas Roadhouse alerted investors that it expects food costs to continue hovering about 7% above year-ago levels through the remainder of the year, led by climbing beef prices. That projection translates into a 10% increase in costs for the third and fourth quarters.
The exception was Bloomin’, whose unit-level margins jumped to an average of 20.3%—5 percentage points above the comparable benchmark of 2019. The multiconcept operation said it expects food inflation to accelerate, but marginally. The company now expects commodity costs to run about 1% above last year’s level through the remainder of 2021. It had earlier predicted that costs would remain flat.
But the company held firm in its Wall Street guidance on labor costs. It still expects a rise of 3% to 3.5%.
Bloomin’ pointed out that it did not furlough any employees during the pandemic, a decision that enabled it to reschedule quickly as sales rebounded.