Takeaway: Casual dining trends, although weak, are improving on the margin.

We have been bearish on the casual dining sector since early June and this morning Black Box gave us a look at November sales trends, which are, on the margin, positive for the industry.  Same-restaurant sales trends, although positive, were down sequentially from October while traffic trends, although negative, were up sequentially from October.  Before we delve further into the details of the release, we thought it would be useful to point out which casual dining companies have seen same-restaurant sales estimates adjusted since November 2nd.

The following companies have seen 4Q13 same-restaurant sales estimates revised upward since November 2nd: BBRG, BLMN, BOBE, BWLD, CBRL, CEC, IRG, RRGB

The following companies have seen 4Q13 same-restaurant sales hold steady since November 2nd: CAKE, CHUY, DFRG, DIN, EAT, KONA, TXRH

The following companies have seen 4Q13 same-restaurant sales estimates revised down since November 2nd: BJRI, DRI, RUTH

Moving back to the release, Black Box reported that November 2013 same-restaurant sales increased +0.8%, a 20 bps sequential decline from October.  Comparable traffic trends were down -0.9%, a 50 bps sequential improvement from October.  These same-restaurant sales and traffic estimates come against results of +1.0% and -1.4%, respectively, in October.


Same-restaurant sales and traffic estimates on a 3-month basis improved +30bps and +30bps, respectively, on a sequential basis.  In aggregate, same-restaurant sales and traffic trends have been improving on a 3-month basis since August 2013.







In addition, consumer willingness to spend in November signals a recovery from a dismal September and October. 





Although same-restaurant sales were down sequentially and traffic is still negative on a year-over-year basis, the 50 bps sequential improvement in traffic and the overall slope of the lines are encouraging signs for the casual dining industry.  If this trend persists, we expect to see a steady recovery from the doldrums of 2013.


Currently, consensus metrix estimates for the 25 casual dining chains we track in the space are for 4Q13 same-restaurant sales growth of +1.2% (excluding DRI brands) versus +0.4% in 3Q13.  This would imply a 23 bps sequential deceleration in same-restaurant sales on a trailing twelve month basis over the prior quarter.






Howard Penney

Managing Director


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