Technomic: Sales started off strong in January

Sales rose 6.3% in the month as the industry continues its late-2017 momentum, according to the Technomic Chain Restaurant Index.

Sales surged 6.3% in January, according to the latest Technomic Chain Restaurant Index, as the largest restaurant chains increased the momentum they gained late in 2017.

The increase in sales included a 3.7% increase in traffic, as consumers continued to dine out more often, likely buoyed by higher wages, lower unemployment and spiking consumer confidence.

The figures are total sales and traffic, rather than same-store sales. The results suggest the industry is on better footing heading into 2018, as consumers are clearly more confident and willing to spend more.

“I believe they have some momentum right now,” says Sara Monnette, vice president, innovation for Technomic.

Chain traffic up in January

Increases in all segments except casual and fine dining led to a 3.7% increase for the first month of 2018.

The January number was something of a surprise, given that weather in the month likely kept some people home, especially in markets such as the Northeast and Midwest that were hit hard.

But Monnette says that January 2017 was “a bit lackluster,” meaning same-store comparisons were easier this time around, and likely inflated the number.

The index covers the 200 largest chains from Technomic's Top 500 Chain Restaurant Report. It is based on data from Technomic Transaction Insights, which collects data from 3 million customers and nearly 20 million monthly restaurant visits.

All restaurant sectors had at least flat sales in January, led by an 8.9% increase in fast-casual sales, and a 7.6% increase at quick-service chains. Family-dining concepts such as Denny’s, meanwhile, had a 5% increase, and casual- and fine-dining chains were largely flat, up 60 basis points.

Sales surge among Top 200 chains

January saw sales spike 6.3%, with gains across all segments.

But casual dining, which had shown some signs of improvement more recently, saw a 2.9% decrease in total traffic for the month.

Much of that might have been from store closures—casual-dining chains in the Top 500 closed 1.4% of their locations last year, for instance. But it’s clear the sector is still losing customers as consumers opt for more takeout options.

“When fewer and fewer people are walking through the door, that’s not a good sign, even if they may be spending more when they do visit,” Monnette says.

She notes that, according to Technomic’s Consumer Brand Metrics, the number of people who claim they “never” visit a casual-dining restaurant increased 4 percentage points.

But total traffic in January was up for each of the other sectors, including 3.8% at fast-casual chains, 4.4% at midscale restaurants and 4.5% at quick-service concepts—which include chains like McDonald’s and Burger King that have been aggressively courting customers with discounts.

The results, combined with 4.4% growth in the last three months of 2017, suggest that the industry might be turning a corner after the worst period since the end of the Great Recession. Same-store sales and traffic had been weak for both 2016 and 2017.

Indeed, U.S. consumer confidence hit a level not seen since 2000, according to The Conference Board. Unemployment is down. Wages rose 2.9% in January, and Congress just approved tax cuts that should put money in many workers’ pockets.

That could signal a potential turnaround. But Monnette isn’t ready to go there yet.

“I think it’s too early to call if the restaurant industry is showing signs of a turnaround,” she says. “Clearly, there are some chains doing well right now and some that are doing not so well. There is definitely some momentum, with 2017 ending on a high note for the economy, employment and retail spending.

“But time will tell if that can all continue.”

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