Restaurant Sales Remain Positive as Customer Traffic Weakness Persists

Conditions in the restaurant industry were mostly flat in April, as an uptick in same-store sales was dampened by continued struggles with customer traffic.

The National Restaurant Association’s Restaurant Performance Index (RPI) stood at 99.8 in April, down 0.2% compared to March. It was the first time the index, which serves as an indicator of the overall health of the restaurant market, fell below the 100 threshold that separates industry growth from contraction.

The RPI continues to be weighed down by the Current Situation Index component, which measures ongoing trends in same-store sales, traffic, labor, and capital expenditures. Although the Current Situation Index actually improved to 99.5 in April, a 0.1% gain from March, it was the ninth consecutive month that the rating was below 100. The primary contributor to those lower readings appears to be customer traffic. In April, only 27% of operators said their customer traffic levels had improved compared to the year before, a reduction from 31% who said the same in March. At the same time, 49% of operators said year-over-year customer traffic was worse, up from 46% in March. Those survey results marked the 14th time in 15 months that operators reported a net decline in customer traffic.

Operators fared better on the sales side, with 48% stating year-over-year sales were up in April, a 3% gain from March. Only 33% reported fewer sales, less than the 39% who reported the same the month before.

Black Box Intelligence reported similar differences in sales and traffic for April. The restaurant industry research firm said sales grew 1.5% for the month while traffic was down 1.7% compared to a year ago. Within individual segments, upscale casual was the top performer followed by quick service restaurants. Fine dining was the lowest-performing segment, a trend Black Box attributed to wealthier consumers downgrading some of their premium dining occasions from fine dining to upscale casual.

The uneven economic conditions in the industry did appear to have some effect on the normally resilient equipment purchasing activity. The National Restaurant Association found that 49% of operators made a capital expenditure for equipment, expansion, or remodeling during the last three months. It was the lowest reading in 11 months and a 2-percentage-point decline from March.

While fewer equipment purchases may have been made recently, a majority of operators are still planning future investments. Fifty-four percent of respondents said they expect to make a capital expenditure sometime during the next six months. Although that reading was down 2% from March, it still represented the 13th consecutive month above 50%.