Sales Slow in July
Year-over-year (YoY) same-store sales and traffic experienced the fifth consecutive month of decelerating sales. Looking at traffic numbers from the first week of August, Black Box Intelligence expects the negative traffic growth trendline will continue its streak through the end of the month.
July's sales growth was +0.6%, slowing 1.3% MoM. Putting it into a longer historical perspective, this is the weakest growth posted by the industry since February 2021 – the last month in which the industry lapped over a pre-pandemic month. Traffic growth was -5.1% in July, a decline of 0.4% MoM. Like same-store sales, this was the softest traffic growth posted by the industry since February of last year. The slowdown in sales growth was widespread throughout the industry in July. During the month, all restaurant segments experienced a deceleration in YoY same-store sales growth rates. July's top performing segments based on sales growth were Family Dining and Fast Casual. The industry's worst performing segments – those posting negative YoY same-store sales growth – were Casual Dining and Fine Dining. Looking at same-store sales performance in July 2022 compared to July 2019, the top performing segments were Quick Service, Fine Dining and Fast Casual. Analysts took it one step further – looking at the three-year sales growth rates in July compared to the average for the previous three months in 2022. Data reveals that only two segments were able to improve their performance during the last month – Quick Service and Family Dining.
On the other hand, Fine Dining experienced the most significant slowdown in three-year sales growth. The data aligns with broader macro pressures against a backdrop of inflation and the looming question of recession. Consumers continue to contend with these pressures by trading their spending to segments and brands with the lowest average checks (typically Quick Service) or toward lower price points within Full-Service restaurants (typically Family Dining). After a strong streak as a top performer, Fine Dining's continued waning performance last month indicates an acceleration of erosion in the segment.
DRI Has some Exposure to Fine Dining
The fine dining segment represents 8% of DRI revenues, and OP grew 106% last year. During fiscal 2022, the average check per person at the Capital Grill increased from $85.50 to $92.50 (8.0%), with alcoholic beverages accounting for 27.7% of The Capital Grille's sales. In 2022, the DRI Fine Dining segment profit margin increased 320bps, driven primarily by lower marketing expenses and lower restaurant labor, offset by higher food and beverage costs. Current DRI estimates show 11.6% SSS growth for the fine dining segment in the AUG quarter.
MCD Potential Blockbucker New Product
McDonald's is testing the Chicken Big Mac in the U.S.
Over the weekend said that it would start testing a Big Mac made with chicken patties rather than burgers at select locations in Miami later this month. The Chicken Big Mac will be made with crispy tempura chicken patties and the Big Mac sauce, pickles, shredded lettuce, and American cheese. "We're always looking to give our fans more ways to enjoy the classic menu items they know and love," the company said over the weekend. McDonald's introduced its Chicken Big Mac earlier this year but sold out of the product within ten days, leading McDonald's to pull the sandwich from its menu. The burger giant has been pushing chicken hard recently to compete better against Chic-fil-A. "Chicken continues to be a significant opportunity for us," CEO Chris Kempczinski said, referring to a pair of global chicken sandwiches the chain has on its menu in many markets. "We've got some great global equities already in our McNuggets and with McChicken. But we also have some equities in McCrispy and McSpicy that we think we've got an opportunity to do more with globally. So that's going to be a priority area."
Chicken wing deflation continues - Tailwind for WING to drive value and traffic into the stores
