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September restaurant sales show slight improvement: Black Box

Despite hurricanes, tariffs, September uptick keeps two-year performance steady

Black Box September restaurant sales were slightly positive, reported TDn2K. According to its Black Box sales measurement intelligence data, TDn2K said comparable sales for September grew 0.09 percent from last year. Also, same store traffic decreased 2.96 percent from last year. For the entirety of Q3 2019, restaurants posted a negative comparable sales decline of 0.42 percent, which is not good news. Same store traffic, which has been a weakness for the restaurant industry as a whole, decreased 3.53 percent during the quarter.

As Eatery Pulse reported last month, TDn2K expects “sluggish sales” to continue into calendar Q4. There’s a softening in the economy, and sales results posted by restaurants in the quarter lap fairly strong 2018 numbers. There were 107 positive markets, while 91 markets posted negative comparable sales. In analyzing Black Box September restaurant sales, TDn2K noted more than half of markets reported comparable sales growth.

A total of 170 brands and 31,000 locations make up the sample that TDn2K uses in its Black Box data. The strongest region, the Southeast, grew its sales by 1.51 percent. Florida (considered a separate market by Black Box Intelligence) was the weakest region, posting negative sales—a decline of 3.12 percent.

“Hourly, non-management turnover increased again during August,” said TDn2K’s analytical team. “Under-staffing remains a huge concern and is expected to continue.” However, for the quarter, management turnover was down. It’s important for restaurant operators to keep staff turnover under control. The data shows that restaurants that have higher retention rates have higher guest sentiment scores.

Contraction complete, but two-year sales performance consistent

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Sales have completed a contraction, with Q3 2019 posting the first negative performance in two years. However, overall sales performance has been consistent over a two-year period. Comparable two-year sales growth for the last few quarters hovered around 0.8 percent, with Q3 coming in at 0.7 percent. Also, Q3 traffic for 2019 saw the worst (single-year) sales decline of the last two years at -3.5 percent.

“This is something we were expecting given the underlying relentless erosion of guest counts and the fact that the industry was headed towards tougher previous year sales comparisons as we went into the second half of 2019,” said Victor Fernandez, vice president of insights and knowledge for TDn2K.

Nevertheless, comparable guest traffic for September showed an improvement over the previous two months, noted TDn2K. The decrease of 3.0 percent demonstrated improvement. This may be another reason to consider performance in September somewhat of an uptick. Given the economic conditions, however, there’s not enough data in to celebrate just yet.

The University of Michigan’s sentiment index also showed improvement. It rose to 93.2 in September after a depressing drop to 89.8 in August, according to Bloomberg. However, a third of respondents are concerned about tariffs. Also, fewer respondents than before envisioned wages rising over the coming year.

Hurricane impact, softening economy not helping

There’s a reason Florida’s sales were the worst among the markets. Hurricanes impacted the state and restaurants there posted a 5.2 percent decrease in September comparable sales. Compared with August, the 5.2 percent decline is down 1.6 percentage-points. Also, the Southeast market reported an uptick in sales, due to serving customers who were displaced from the Florida market during the hurricanes. That’s potentially part of the story behind the Southeast posting the strongest sales.

“The negative effects of the trade war are spreading across the economy, largely driven by business uncertainty,” said Joel Naroff, president of Naroff Economic Advisors and TDn2K economist. “Manufacturing has already moved into a downturn. Job growth has slowed, due to businesses willing to leave job openings unfilled as well as the lowest unemployment rate in nearly fifty years limiting the supply of qualified workers. The result is that household incomes are growing more slowly, making it difficult for consumption to expand strongly. It looks like growth in the third quarter, which was just completed, will be in the 2.0 percent range.”

Outlook, recommendations

Restaurants face the strongest “headwinds” of declining guest traffic and staff turnover. Neither staffing issues, of which turnover has been at historically high levels, nor sales are likely to improve. That’s the outlook. Restaurant operators are wise to continue innovating and investing in their businesses. The strongest returns on investments will take hold in the areas of guest experience and workforce development.

“Data has shown that those companies investing in employee training, career development (particularly for their managers) and crafting a strong sense of purpose throughout their workforce will be those positioned to fare better in retaining and engaging their workforce,” noted TDn2K’s analysts. Blackbox September restaurant sales provide a glimmer of hope of what’s possible if operators are up to the task.

Photo credit: Caroline Attwood

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