Sales Up, Traffic Down and Beverage Alcohol Sales SkyrocketingJuly 9, 2012 By: Emily Hanna Mayock
Restaurant operators saw continued gains in same-store sales during May, although shaky confidence could be putting a drain on customer traffic.
May saw the 12th consecutive increase in same-store sales, according to the National Restaurant Association. Additionally, 61% of restaurant operators reported a same-store sales gain between May 2011 and May 2012, up from 57% who reported a sales gain in April. However, 28% of operators reported lower same-store sales during May, up from 25% who reported similarly in April.
The future outlook is positive as well. The association’s Restaurant Performance Index stood at 101.4 during May, down only 0.2% from April’s level of 101.6. Despite the decline, May represented the seventh consecutive month that the RPI stood above 100, which signifies expansion in the index of key industry indicators.
“Despite a soft patch in the overall economy, restaurant operators reported positive same-store sales for the 12th consecutive month,” Hudson Riehle, senior vice president of the Research and Knowledge Group for the association, said in a news release. “Looking forward, restaurant operators remain generally optimistic about sales growth in the months ahead, though they are somewhat less bullish about the direction of the economy.”
The RPI tracks the health of and outlook for the U.S restaurant industry in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction.
The news wasn’t all good, however. Restaurant operators reported softer customer traffic results during May, according to the NRA. Forty-two percent of restaurant operators reported higher customer traffic levels between May 2011 and May 2012, down from 46 percent who reported positive traffic in April.
The downward trend mirrors that of U.S. consumer confidence, which fell for the fourth straight month to its lowest level since January. The index fell to 62.0 from a downwardly revised 64.4 the month before.
The consumer expectations index was at its lowest level since November, according to a private sector report. And consumer spending growth ground to a halt, as auto purchases lagged.
A short-term hiccup perhaps, but historical data from the Bureau of Labor Statistics suggests a longitudinal shift toward higher traffic. Forty percent of consumer spending on beverage alcohol during 2011 was conducted at bars and restaurants, compared to 60% spent in stores for the purpose of drinking at home. Some 30 years earlier in 1982, only 24% of spending occurred in bars and restaurants, while 76% occurred in stores.
But the Bureau of Labor Statistics confirms the findings of the NRA: Just because spending at bars and restaurants has gone up doesn’t mean consumers go out more often. Adjusted for inflation, the price of alcohol purchased in stores has gone down 39%. The cost of beverage alcohol purchased at bars has increased substantially—to the tune of 79%.
When pieced together, the above stats have not weighed down on restaurant operators’ projections as one might expect. The NRA’s Expectations Index, which measures restaurateurs’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), was down only slightly to 102.0 in May from 102.2 in April.
Operators largely are optimistic that sales will improve in the near term. Nearly half (48%) expect higher sales in six months compared to the same period the previous year, down slightly from 52% who reported similarly last month. Only 8% of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, unchanged from last month.
The outlook for the overall economy is less bullish, however. Of the restaurant operators included in the NRA’s survey, 19% said they expect economic conditions to worsen in the next six months, up from only 10% last month and the highest proportion in seven months.
Editor’s Note: What’s happening in your restaurant or bar? Is your traffic way up—or way down? How about beverage alcohol sales? Tell us in the comments.