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Black Box Sales, Traffic

Black Box released same-restaurant sales and traffic estimates for the month of June last week that showed a strong acceleration versus a weak performance in the month of May. Same-restaurant sales grew to +2.1% up 100 basis points (bps) sequentially, and 200 bps YoY and same-restaurant traffic decreased -1.5%, an 80 bps sequential improvement, and up 20 bps YoY.

June Restaurant Sales and Employment Trends - June Chart 1

June Restaurant Sales and Employment Trends - June Chart 2

It appears that restaurants are continuing to raise prices despite declining commodity prices. While this is a short term benefit to margins, long term it is testing the elasticity of their customers.  As you can see from the chart below, there is a clear divergence between the operators taking price and a decline in traffic. In June there is a minor uptick in traffic, and it will be interesting to see if this negative trend continues to reverse.

June Restaurant Sales and Employment Trends - June Chart 3

Knapp June Sales Trends

Knapp reported that comparable restaurant sales in June 2015 were +1.3% for same-store sales and -1.3% for guest counts.  This represents a +20 and +60 basis point sequential improvement, respectively, for the month.  On a 2-year basis, sales accelerated to +0.2% and traffic matched May’s 2-year average, down -2.0%. 

Employment Growth Slowing

The month of June was a mixed bag of results for employment. Employment growth continues to be largely attributable to the 25-34 YOA (+2.55%) and 55-64 YOA (+2.21%) which accounted for 39% and 34% of the growth, respectively. The downward trend is concerning, especially given that a large portion of the growth is in the 55-64 YOA cohort, with a considerable amount of that employment being part time.

June Employment Growth Data:

  • 20-24 YOA +1.07% YoY; +32.6 bps sequentially
  • 25-34 YOA +2.55% YoY; -86.1 bps sequentially
  • 35-44 YOA +1.04% YoY; +26.9 bps sequentially
  • 45-54 YOA -0.35% YoY; -62.5 bps sequentially
  • 55-64 YOA +2.21% YoY; -40.1 bps sequentially

June Restaurant Sales and Employment Trends - June Chart 4

Thoughts from our macro team on June Retail Sales

Sequential slowdown on the Headline # in June – we knew the headline would decelerate sequentially given the slowdown in auto sales off of 10Y highs in May but this was worse than expected.

Headline: Down -0.3% MoM and decelerating on both 1Y/2Y

Headline: ex-Autos & Gas: Down -0.2% MoM, decelerating YoY and flat sequentially on a 2Y basis

Notables:   

  • Gas:  Gas prices were up ~3% in June which translated to a +0.8% gain in Gas Station sales
  • Auto’s:  Auto’s & auto parts down -1.1% MoM.  Vehicle sales were down -3.5% to 17.1mm units in June – down from May’s gangbusters 17.7MM figure (a 10Y and post-recession high)… vehicles sales were out on 7/1 so we already knew this
  • Industry Momo: 9 of 13 Industries decelerated sequentially on a YoY basis
  • I/S:  We’ll get the I/S ratio’s a bit later but those continue to deteriorate with Inventories growing at a premium to sales

Words from our fearless leader (CEO) Keith McCullough on June Retail Sales

 

US Retail Sales “miss” (vs. sell side expectations) confirms our #LateCycle slowing view.