Vehicle miles traveled have declined each month in 2008 so this not a new trend, but with gas prices down nearly 60% from the peak levels seen in July and down 40% YOY, I would not be surprised if this trend started to reverse. Although gas prices had already started their descent in September, prices were still over $3.50 per gallon and on average, were still 30% higher than the prior year, which might help explain why the number of miles traveled continued to fall. Lower gas prices and an increase in miles driven should benefit traffic trends at all restaurants, but CBRL should feel the benefit more proportionately as 86% of its restaurant base is located on the interstate highway system. That being said, its business is highly related to highway travel. Making matters worse is the fact that CBRL’s restaurant base is highly concentrated in both the South Atlantic states (33% of CBRL’s stores) and the South Gulf states (31% of CBRL’s stores), which experienced the biggest declines in vehicle miles traveled in September.
CBRL’s traffic trends have been weak and like other casual dining operators, deteriorated further in August, September and October, down 5.4%, 6.7% and 7.2%, respectively. For reference, even with the significant magnitude of those declines, CBRL actually outperformed the casual dining group as a whole which saw its traffic fall 6.1%, 6.8% and 8.2% in those respective months.
The chart below highlights the strong relationship between vehicle miles traveled and CBRL’s same-store sales and traffic growth. If gas prices continue to fall, thereby leading to an increase in the number of miles driven, CBRL should begin to see some relief from a demand perspective.