Restaurant Anthology - Part 1

This week's macro call outs all point, not surprisingly and not new, to rising costs for both restaurant companies and their customers, alike.

For more details regarding any of the following highlights, please refer to this week's relevant postings, which are sorted by date.
  • Despite optimism around this week's reported May retail sales, BIGResearch's Consumer Intentions & Actions Survey, which monitors over 7,500 consumers, refuted this bullishness, reporting that in June, 53.8% of consumers are shopping for things they need rather than want (up 7 points from a year ago). Although meant to jumpstart consumer spending, only 5% of those consumers who have received their economic stimulus checks have put them toward discretionary purchases - posted June 12.
  • Another data point affirming that less than optimistic view of the consumer's purchase outlook was that at $4.00 a gallon, gas is now eating up 85% of every incremental retail dollar (provided by SixthManResearch.com) -posted June 13. These higher gas prices are hurting consumers in certain regions of the U.S. more proportionately than others relative to income levels. The O'Charley's concept, LongHorn Steakhouse, Steak n Shake and Ruby Tuesday are most exposed to these hardest hit areas (based on % of store base) - posted June 11 (CHUX, DRI, SNS, RT).
  • This week's commodity price moves spared coffee and dairy users (i.e. Starbucks) as they were the only commodities on our screen that declined. Coffee prices are down nearly 19% from March peak levels. Corn, wheat and soybeans all moved up substantially again this week, and are more relevant to the restaurant industry at large - posted June 13. The July minimum wage increase will put increased pressure on restaurant margins in the upcoming quarter (3Q08) - posted June 12. Faced with both a tightened consumer and higher costs across the board, restaurants must strike a balance between driving traffic and preserving margins. NPD Group data point to a recent decline in the % of visits on deal (still up YOY) at casual dining restaurants, which should bode well for margins - posted June 9 and 11.