Restaurant performance fell this summer.
Dampened by softer sales and traffic levels and continued uncertainty among restaurant operators, the National Restaurant Association's Restaurant Performance Index (RPI) declined for the second consecutive month in August. The RPI -- a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry -- stood at 99.4 in August, down 0.3 percent from July.
August marked the second consecutive month that the RPI stood below 100, the level above which signifies expansion in the index of key industry indicators. The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 99.3 in August -- down 0.5 percent from July and the second consecutive monthly decline. ??
Although restaurant operators reported net positive same-store sales in August, the overall results were softer than recent months. Forty-five percent of restaurant operators reported a same-store sales gain between August 2010 and August 2011, while 37 percent of operators reported lower same-store sales. In July, 48 percent of operators reported higher same-store sales, while 34 percent reported a sales decline. ??
Meanwhile, restaurant operators reported a net decline in customer traffic for the first time in three months. Thirty-four percent of restaurant operators reported an increase in customer traffic between August 2010 and August 2011, down from 40 percent of operators who reported higher traffic in July. In comparison, 42 percent of operators reported a traffic decline in August, up from 37 percent who reported lower traffic in July. ??
Overall, restaurant operators reported relatively steady levels of capital spending. Forty-four percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, roughly on par with 43 percent who reported similarly last month.
The Expectations Index, which measures restaurant operators' six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 99.5 in August -- down 0.1 percent from July and the lowest level in nearly two years.
In addition, August represented the second consecutive month that the Expectations Index stood below 100, which illustrates restaurant operators' uncertainty about business conditions in the months ahead. ??Restaurant operators' outlook for sales growth in the coming months continues to deteriorate. Thirty-three percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 39 percent last month and the lowest level in 19 months. In comparison, 23 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, matching the proportion that reported similarly last month. ??
Meanwhile, restaurant operators remain generally pessimistic about the direction of the overall economy in the months ahead. Only 18 percent of restaurant operators said they expect economic conditions to improve in six months, compared to 17 percent who reported similarly last month. Meanwhile, 31 percent of operators said they expect economic conditions to worsen in the next six months, matching the proportion that reported similarly last month.
Restaurant operators are slightly more optimistic about capital spending in the months ahead. Forty-four percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up slightly from 42 percent who reported similarly last month. ??