Gas prices have been extremely favorable on a YOY basis for restaurant companies this year. During the first half of the year, gas prices were down 38% on average. This YOY favorability has continued in 3Q, but gas prices have moved higher in the last month, up about 7%. Looking at the chart below, this YOY cost benefit will start to moderate and could go away in the fourth quarter. Gas prices typically decline after the peak summer driving season, but are not likely to decline as dramatically as they did from last summer’s historically high prices.
From a restaurant demand perspective, consumers do not typically think in YOY terms. Gas prices are up 7% in the last month and 14% in the last three months. This will put increased pressure on consumers’ wallets and impact their decisions about eating out.
To that end, we have seen this being played out in the most recent restaurant industry sales data released by Malcolm Knapp. For the past 5 months we have seen a sequential decline in same-store sales trends for the Full Service restaurant companies.
I would also note that a key Research Edge MACRO theme is the Q4 REFLATION ROTATION theme, where reported inflation will begin to show up in Q4. Helping to contribute to that theory will be the price of gas consumers are paying by November. Currently the national average for a gallon of gas is $2.64 relative to $2.65 on October 27, 2008 and $2.40 by November 3, 2008.