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.
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.
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
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
