The delta variant of COVID-19 has led to a renewed surge of cases around the country, with just about every state affected and particularly populous states like California, Texas and Florida--the restaurant industry's first, second and third-largest markets, respectively. It has also led to a rash of new mandates, including mask requirements in at least four states and a growing number of vaccine requirements for dine-in business.
Such a surge has not been lost on restaurant industry executives. Most publicly traded restaurant companies discussed the delta variant and renewed spread of COVID-19, according to a search of public company transcripts on the financial services site Sentieo.
For the most part, executives have expressed caution about the variant, even as they’ve generally been bullish about their own prospects. While some of that could be due to earnings calls taking place early in the latest surge—late July to early August—it’s also a reflection of current sales reality.
“Delta is not having an impact on our business trends,” Kevin Hourican, CEO of Sysco, told investors last week, according to Sentieo. As the country’s largest distributor, with a huge number of independent restaurant customers. Sysco would have as good an idea as anybody as to the potential impact of the latest surge.
Sysco’s comments reflect broader industry numbers, at least so far. Same-store sales rose 8.1% in July, according to Black Box Intelligence. And total industry sales hit another record in the month and are well above what they were before the pandemic.
To be sure, some executives have said delta is affecting their sales. Chili’s owner Brinker International said this week that it’s seen “some softening” as the variant has picked up steam, as Restaurant Business reported this week. That could be due in part to the chain’s home in hard-hit Texas.
And Pietro Satriano, CEO of the second-largest distributor US Foods, said last week that sales were “a tick down of about 100 basis points” the previous two weeks. But, he said, “it’s too early to say whether that small change is due to the impact of the delta variant.”
Coronavirus cases bottomed out in June and then began picking up as the much more contagious delta variant began to spread. The 7-day average of cases was just under 16,000 on July 5. They exceeded 84,000 by the end of the month, according to the U.S. Centers for Disease Control and Prevention. They have continued to surge since, with the 7-day average topping 133,000 on Wednesday.
For the most part, however, states have avoided the types of shutdowns that coincided with the initial round of infections and again last winter with another surge.
That’s going to be the key going forward. “The thing that would impact the business is if governments put restrictions back on operators,” Hourican said. “Let’s be optimistic that won’t be necessary.”
Many companies have expressed caution. “Our expectation of greater normalcy over the next few months as more adults return to their workplaces and children return to school in person assumes that the delta variant dos not dramatically affect or force a return to mandated restrictions and thereby impede our current trajectory,” Red Robin CEO Paul Murphy said on Wednesday.
Most of the caution on the part of restaurant chains was expressed by casual dining executives that saw the biggest impact from the shutdown last year and are clearly more susceptible to a renewed round of restrictions.
“Despite what is still a fluid and unpredictable environment due to the delta variant and COVID-19, we remain cautiously optimistic,” John Peyton, CEO of Applebee’s and IHOP owner Dine Brands Global, said earlier this month. He noted that strong consumer confidence and more federal spending give him reason for that confidence.
“Our outlook would certainly be impacted if large areas of the country return to lockdowns or restaurant guests become uncomfortable dining out,” he said.
While casual dining restaurants have generated more takeout sales over the past year than they ever have, they remain dependent on dine-in business for their sales and profits. Losing that could hurt and is clearly a reason for caution.
Fast-food chains, however, have largely thrived since last summer thanks to their drive-thrus. Those companies are perhaps predictably more confident—though those companies with a global presence fret about the impact in some of their international markets. “There’s still some uncertainty as we continue to see pandemic-related stops and starts in markets around the world, especially now with the delta variant,” McDonald’s CFO Kevin Ozan said last month.
Delivery-heavy chains, on the other hand, have an even different perspective. A new round of shutdowns—or more reluctant restaurant diners, or more federal stimulus payments—could lead to an increase in their business. Even then, the variant makes things difficult to predict.
“There are many factors outside of our control that are difficult to predict,” Domino’s CEO Ritch Allison said last month. “As COVID continues to unfold with the delta variant, for example, what happens with respect to ongoing government stimulus and intervention in the economy.”