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Knapp Track comparable restaurant sales in March indicate that the casual dining recovery is steadily progressing.  February’s casual dining comparable restaurant sales number was revised downward from 1.6% to 1.4%.  This month’s report shares interesting commentary on gasoline prices and the impact they have on different income brackets and restaurant categories.

Knapp Track preliminary results for March suggest that the casual dining recovery, which took a pause of sorts in the fourth quarter, took hold once more in the first quarter with trends improving throughout the quarter.  March comparable restaurant sales of +1.6% signify a sequential uptick in two-year average trends of 105 basis points.  The revision in January’s trends means that the sequential uptick in two-year average trends in February was 85 basis points.  1Q11 brought a sequential acceleration on comparable restaurant sales, according to Knapp Track, of approximately 140 basis points. 

Comparable guest counts in the casual dining space saw a sequential gain from a revised -0.2% result in February.  March’s preliminary comparable guest counts print of +0.1% remains a concern given that it continues to lag overall sales.  1Q comparable guest counts two-year average trends increased 100 basis points from 4Q to -1%.  That notwithstanding, given the coincident increase in gasoline prices, it is impressive that the trend continues to improve.  Knapp noted that, according to the most recent data available from the Bureau of Labor Statistics Consumer Expenditures (2008 and 2009), gasoline price fluctuations have different impacts on the various income classes.  The impact of the substantially higher gas prices is greatest, according to Knapp’s read on the data, on fast food.  In 2009 (low gas prices), the under $30k income household spend 7.1% of income on gasoline, the $30k-$49.9k household spent 4.7%, the $50k-$69.9k house spent 3.9%, the $70k-$99.9k household spent 3.2%, the $100k and over household spent 2%, and the $150k and over household spent 1.5% on gasoline.  

In addition, Knapp points out that if gasoline prices remain near the current levels, it could reduce overall gains in the restaurant industry by -0.6% for the year.  The year-to-date run up in gasoline prices, on an annualized basis, translates into a drag equivalent to 75% of the $111.65 billion consumer stand to gain from the 2% reduction in Social Security tax in 2011. 

We continue to favor EAT, RUTH, and KONA.

Howard Penney

Managing Director