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Mild hurricane season could be good for restaurants

Despite Hurricane Lane, few Atlantic storms means the next three months will be a sales roller coaster, says RB’s The Bottom Line.
Photograph: Shutterstock

The Bottom Line

The Atlantic hurricane season isn’t expected to be as bad as forecasters originally thought, and that’s a good thing for restaurant sales.

But it will also make the next three months a little misleading.

The National Oceanic & Atmospheric Administration now expects a below-normal Atlantic hurricane season, including four to seven named hurricanes and zero to two major hurricanes. That’s fewer storms than what was predicted in May.

That’s good for lots of reasons, of course, because it means people along populous coasts in the Southeast won’t have to worry about losing property or loved ones. But it’s also good for restaurant sales, as it’s hard to make hamburgers or chicken wings when you don’t have power for the refrigerators. Good weather is better for restaurant sales.

Lynne Collier, analyst with Canaccord Genuity, said she expects August same-store sales at casual-dining restaurants to “close on a high note” because of the lower hurricane season.

“If this forecast holds, the months of August and September may see a tailwind as we lap Hurricane Harvey in the last week of August and Hurricane Irma in the second week of September,” Collier wrote.

A year ago, Hurricane Harvey hit Texas, hammering Houston with historic flooding. Texas is a big state and Houston is one of the country’s most populous cities.

Shortly thereafter, Hurricane Irma hit Florida, resulting in the biggest evacuation in that state’s history and leaving millions without power for a time afterward.

Those are two of the four most populous states in the union, and the dual storms had an expected impact on restaurant sales.

According to Technomic, sales fell 2.7% in August 2017 and 1.8% in September. According to Black Box, same-store traffic fell 3.9% in August and 4% in September.

Some chains got hit particularly hard, maybe no more so than Fiesta Restaurant Group, the owner of Pollo Tropical, which is mostly in Florida, and Taco Cabana, which is mostly in Texas. Pollo’s same-store sales plunged 10.9% in the third quarter of last year. Taco Cabana’s same-store sales fell 12.6%.

No hurricanes, of course, means that restaurants will be far more likely to generate same-store sales growth in those two months. After all, nothing helps a chain’s same-store sales quite like easy comparisons.

Numerous other companies stand to benefit, too, such as Olive Garden, LongHorn Steakhouse and Chuy’s.

All that said, restaurants will also not get the bounce. Black Box same-store sales rose 0.9% in October. Similarly, Technomic total sales accelerated 440 basis points, from a 1.8% decline in September to a 2.6% increase in October.

Customers that month unleashed some pent-up demand in states hit by the storms, while relief workers, construction employees and insurance adjusters that had flocked to the states visited restaurants that were open.

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