Casual dining drives March restaurant sales recovery

Restaurant industry same-store sales bounced back in March after a dismal February, as consumer confidence improved and sales at casual-dining restaurants rose, according to the latest NRN-MillerPulse survey.

MillerPulse, an operator survey exclusive to Nation’s Restaurant News, questioned operators from 48 restaurants in April regarding March sales, profit trends, performance and outlook. Respondents included operators from all regions of the country that represent the quick-service, casual-dining, fine-dining and fast-casual segments. Those surveyed in April represented restaurants that booked about 4 percent of industry sales.

Overall industry same-store sales rose 0.1 percent in March, the survey found. Industry traffic decreased 1.9 percent for the month, but improved from a 2.9-percent decline in February. Overall industry same-store sales decreased 1.8 percent in February, the worst performance in three years.

Casual-dining restaurants outperformed quick-service restaurants for the first time in 22 months, driving the moderate sales and traffic boost. Larry Miller, restaurant securities analyst at RBC Capital Markets and creator of the monthly MillerPulse surveys, attributed the swing in segment performance to two factors.

“We think QSR trailed casual dining in part due to harder comparisons and in part due to less discounting,” Miller said, referring to a 6.9-percent increase in quick-service restaurant sales in March 2012, and casual dining’s move from discounting.

Sales at quick-service restaurants, which include both fast-food and fast-casual brands, declined 0.5 percent in March, compared with a 0.1-percent increase in February, MillerPulse found. Sales at full-service restaurants, which include both casual-dining and fast-casual brands, increased 0.8 percent in March, compared with a 4.9–percent decrease in February. Specifically, sales at casual-dining brands rose 0.3-percent in March, compared with a 4.9-percent decline in February.

However, on a two-year basis, quick-service restaurants continued to show stronger sales than casual-dining brands, the survey found, with those segments reporting 5.5-percent and 2.0-percent increases, respectively.

A rise in consumer confidence and spending plans and the dampening impact of the payroll tax introduced at the beginning of the year paralleled the overall increase in industry sales, Miller said.

“The U.S. consumer looks healthier based on the results of our April surveys, and the impact of the payroll tax appears to be waning,” he said.

In April’s survey, 49 percent of consumers said the payroll tax was causing them to spend less, down slightly from March’s survey, when 54 percent of consumers said the payroll tax was impacting their spending.  Furthermore, RBC Capital Markets Consumer Confidence Index rose to its highest level in seven months in April, and future restaurant spending plans increased in April over March, with consumers citing better incomes, job stability and better value restaurants as reasons for their increased spending plans.

 The optimism of restaurant operators looking forward echoed the strengthening consumer confidence. Operators from all segments surveyed — fast food, fast casual, casual dining and fine dining — expect conditions to improve over the next six months, the survey found. That optimism may represent the industry’s trajectory moving into the spring and summer months, Miller believes.

“The improved sales, albeit not strong, coupled with easier comparisons, and a rosier view among consumers suggests we may be seeing the light at the end of the tunnel,” he said.