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August sales down, impacted by traffic, retention: Black Box

Tariffs, hurricane play adverse role in outlook

August restaurant sales were down in August from last year, according to Black Box Intelligence tracking from TDn2K. Black Box August sales, using a 300-restaurant company sample, decreased 0.71 percent, on a comparable basis, from 2018. This performance fared slightly better than July’s 0.96 percent decline. Comparable traffic declined 3.87 percent from last year, also marking an improvement from July (-4.09 percent), however slight.

TDn2K noted that restaurant sales performance was strong last year in the same period, so these results are not so surprising. However, August was the second month in a row with a comparable sales decrease. The trailing 3-month average of comparable sales is -0.56 percent. Trailing 3-month traffic is down 3.68 percent.

Overall, the summer 2019 slowdown is correlated with the decrease in traffic. There is not enough business coming into restaurants. Black Box August sales show that despite strong acceleration in average checks, traffic declines are still winning out.

Sales highlights: August 2019

Fine dining and family dining were the only two darling segments during August. They are outperforming other restaurant segments. Particularly when it comes to fine dining, the experience is attracting traffic. Also, fine-dining restaurants may be investing in that differentiation point.

The Mountain Plains rose to be the strongest region, while New England became the weakest. The Mountain Plains posted a sales increase of 0.57 percent; New England posted a 2.88 percent sales decline. Although the overall sales decrease for all markets improved from July, fewer markets posted comparable sales growth. August’s 43 positive markets results in a decrease from July’s 45 markets.

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Said TDn2K in its report, “The stark reality is that the average restaurant continues to see it’s guest counts dwindle every year since the recession. If the industry is to consistently post healthy sales growth, this guest erosion needs to be solved…. However, it is important to note that August of 2018 had the strongest traffic growth results of last year, albeit still negative. This meant a tough comparison to lap over. Much as what was discussed for sales, current traffic performance remains relatively unchanged when calculating growth on a two-year basis.”

Retention, tariffs, outlook

Hourly employee turnover also continues to impact the industry unfavorably. Employee turnover was particularly tough for QSRs. Twenty-seven percent of full-service restaurants reported a rise in non-management vacancies, while 44 percent of limited service reported an increase in unfilled positions.

The trade battle has also taken its toll. Consumer spending is the only positive segment, noted Joel Naroff, president of Naroff Economic Advisors, a TDn2K economic. That’s supported by a solid job market and income gains.

He further said, “The trade battle between the U.S. and China is creating enough collateral damage that there are now worries that a global economic slowdown is nearing…. The U.S. economy continues to expand, but with new tariffs being imposed and more possible, the future is more uncertain. Europe is being battered by the weakening in its two major trading partners. Japan is hurting as well. The U.S. manufacturing sector is faltering.”

The outlook has not turned rosy for the last third of the year. Using Black Box August sales data and historical metrics, TDn2K is projecting continued weakness. This is based on some tough comparisons to last year’s positive growth of 1.3 percent during the last four months of 2018. Also, expect Dorian and hurricane season to play a role in hurting sales performance along the Atlantic.

Photo credit: Nick Karvounis

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