AUGUST KNAPP TRACK

The full text report, including July final accounting period numbers, was released this evening.

We expect a slowdown in headline Knapp Track sales data as we go deeper into the back half of the year.  The August Knapp Track numbers show a significant decline from July on a two-year average basis, even when adjusting for weather.

Knapp Track casual dining sales growth sequentially slowed in August from July on a two-year average basis.   The sales environment weakened considerably in part due to hurricane Irene but also because of consumer confidence declining in August also had an impact.  Knapp contends that the current situations metric, which declined less than the expectations component in August, is more pertinent for restaurant sales.  Regarding Irene, it is also pointed out in the report that there was a strong bounce-back in restaurant sales in the week following Irene as power outages forced consumers to eat out.

Estimated comparable restaurant sales growth in August was +0.1%.  When adjusted for the weather impact of hurricane Irene, according to Knapp, the comparable sales number is +0.7%.  Final July comparable restaurant sales growth was +1.5% (versus the prior estimate of +1.4%).  The sequential decline from July to August, in terms of the two-year average trend, was -105 basis points.  When adjusted for the 60 basis point adverse impact of weather, the decline was -75 basis points.  Whether or not one uses the weather-adjusted or non-weather-adjusted number, the sequential decline in August’s two-year trend was the largest since ’09.

Comparable guest counts in the casual dining space came in at -1.5% in August on a year-over-year basis.  The final July guest counts growth number was +0.5% (versus the prior estimate of +0.3%).  The sequential decline from July to August, in terms of the two-year trend, was -150 basis points.

Howard Penney

Managing Director

Rory Green

Analyst