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OPINIONFinancing

Restaurant sales tumbled in November

New sales data shows the industry has lost footing after a summer of recovery as shutdowns take hold, says RB’s The Bottom Line.
Photograph by Jonathan Maze

The restaurant industry lost more than half of its sales in April after the coronavirus pandemic led governors across the country to shut down dine-in service in a bid to stem its spread.

The industry has clawed much of that back in the months since then, thanks to a return of dine-in service and a consumer—with more cash than expected given the state of the economy—that grew more accustomed to operating within quarantine.

That has largely shifted in the other direction as shutdowns have returned. Total restaurant sales fell 4% in November from October’s level, according to new federal data. It was the second straight decline in sales after five months’ worth of growth.

On an annual basis, restaurant sales slowed from a 15% year-over-year decline in October to a 17% decline in November.

To be sure, that is a lot better than the 54% annual decline in April or even the 38% decline in May. Yet it illustrates the return of sales-related challenges. It also portends a long winter.

According to Black Box Intelligence, same-store sales over the past three weeks, through Dec. 6, have been “the worst for the industry since early August.” It also notes in its recent weekly report that same-store sales “are trending in thee wrong direction.”

Numbers from various indexes and restaurant company reports—especially full-service restaurants, as fast food and delivery-centric chains are doing fine—are likely to be relatively bad for a while. Shutting dine-in service, or simply consumers opting not to eat at a restaurant out of COVID fears, has that affect on things. But also remember that January and February were strong months a year ago. Comparisons, in other words, only get tougher.

Restaurant companies have already made statements hinting at the challenges that lie ahead. J. Alexander’s sales took a turn for the worse in November, according to my colleague Peter Romeo, and so did sales at both Chili’s and, especially, Maggiano’s.

On Thursday morning, Denny’s told investors that it received a break on its financial covenants in its loan agreement through the end of March, and then gets some eased covenants in the second and third quarters of next year. The eased requirements should help the company through what are expected to be a tough few months, but the fact that it needs this assistance some 10 months into the pandemic says a lot.

We generally are bullish on the future of the restaurant industry. We believe that dine-in sales will pick up faster than many expect once the pandemic ends. And we also believe that independents will come roaring back—eventually—because consumers liked dining at neighborhood restaurants and are unlikely to change. The vaccine, which is already being administered just a year after the first cluster of cases began to appear in China, provides some light at the end of a dark tunnel.

But we have to get there first. And all of that may be cold comfort to an operator that had to close their business because sales fell so much without adequate federal assistance.

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