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Black Box Sales, Traffic dip in november

Despite the industry registering its fifth consecutive quarter of same-store sales growth, Black Box results for November were relatively disappointing.  This disappointment comes after a very strong October, during which same-store sales and same-restaurant traffic increased sequentially on both an absolute and two-year basis.

Restaurant same-store sales increased +1.5%, while same-restaurant traffic decreased -1.1%, during the month.  These numbers were down 130 bps and 150 bps, respectively, on an absolute sequential basis and down 70 bps and 50 bps, respectively, on a two-year sequential basis.

Restaurant Sales, Traffic Dip in November - 1

Black Box estimates 4Q14 same-store sales to fall within the +1.5-2.0% range, which would imply December comps of +0.3-1.8%.  Given the easy lap, this appears to be a fairly conservative estimate. 

The widening gap between sales and traffic suggests an increase in average check during the month, which could be the result of: higher prices, less promotions, or a shift in sales mix. 

Importantly, November’s drop in traffic is consistent with the recent dip in consumer sentiment (Conference Board Consumer Confidence Index).  Black Box noted that the NY/NJ region has been the worst performing for the past six months, while CA has been the best performing region for the past two.

Restaurant Sales, Traffic Dip in November - 2

Restaurant Sales, Traffic Dip in November - 3

 

employment growth slowing

This is the fifth consecutive month employment growth has been positive on a year-over-year basis across our five primary age cohorts.  While one can argue we saw strength across the board, we saw a marked sequential slowdown in growth rates across all but one age cohort – suggesting the momentum in the jobs market may be fizzling.

November Employment Growth Data:

  • 20-24 YOA +1.48% YoY; -143 bps sequentially
  • 25-34 YOA +2.64% YoY; -59.6 bps sequentially
  • 35-44 YOA +1.12% YoY; -25.6 bps sequentially
  • 45-54 YOA +0.39% YoY; -65.4 bps sequentially
  • 55-64 YOA +3.78% YoY; +24.1 bps sequentially

Restaurant Sales, Traffic Dip in November - 44

While widespread employment growth is positive for all restaurants, November’s release screened stronger for casual diners as the 55-64 YOA cohort showed unusual strength.  All told, casual dining is an industry we are quite cautious on as a whole.  However, we continue to favor BLMN and BOBE on the long-side as special situation plays in the space.

The release was undoubtedly a negative, on the margin, for quick service and fast casual restaurants, highlighted by a sequential decline in employment growth rates in the 20-24, 25-34, and 35-44 YOA cohorts.  We continue to favor select, mostly nimble, operators in the space including JACK, YUM, CMG, KKD, PLKI, and WEN.

Howard Penney

Managing Director

Fred Masotta

Analyst