Sanderson Farms’ comments from late August regarding weakened restaurant demand appear to have been spot on. The company had said that August was shaping up like July, and today we learned that casual dining guest traffic was down 6% in August, similar to July’s 6.2% decline. August was actually the strongest month in 2007 from a traffic standpoint, but was still down 1.5% so on a 2-year average basis, traffic trends improved 70 bps from July to down 3.8% (still toxic, in my view). This continued softness heightens our concerns around casual dining operators that seemed to think the worse was behind them in 2Q08 (please refer to my August 30 post titled “Casual Dining Top-Line Risk” for more details). Casual dining same-store sales were down 1.1% in 2Q with traffic down 3.9% while 3Q-to-date (July and August) comparable sales are down 3.8% and traffic has fallen 6.1%.
