Published on : Friday, August 1, 2014
Due in large part to softer customer traffic levels, the National Restaurant Association’s Restaurant Performance Index (RPI) registered a moderate decline in June. The RPI – a monthly composite index that tracks the health of and outlook for the U.S.
restaurant industry – stood at 101.3 in June, down from a level of 102.1 in May and the first decline in four months. Despite the drop, the RPI remained above 100 for the 16th consecutive month, which signifies expansion in the index of key industry indicators.
“Although overall same-store sales remained positive in June, the RPI dipped as a result of softer customer traffic levels,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Looking forward, restaurant operators are generally optimistic about sales growth in the months ahead, and their outlook for capital spending remains near post-recession highs.”
The RPI is constructed so that the health of the restaurant industry is measured 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 for key industry indicators. The Index consists of two components – the Current Situation Index and the Expectations Index.
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.9 in June – down 1.1 percent from May and the first decline in four months. Despite the drop, the Current Situation Index stood above 100 for the fourth consecutive month, which signifies expansion in the current situation indicators.
For the fourth consecutive month, a majority of restaurant operators reported higher same-store sales, though overall results were softer than the May performance. Fifty-five percent of restaurant operators reported a same-store sales gain between June 2013 and June 2014, down from 65 percent who reported similarly in May. In comparison, 27 percent of operators reported a same-store sales decline in June, up from 19 percent who reported similarly in May.
Restaurant operators also reported softer customer traffic results in June. Thirty-nine percent of restaurant operators reported an increase in customer traffic levels between June 2013 and June 2014, down from 47 percent who reported higher traffic in May. Meanwhile, 41 percent of operators said their customer traffic declined in June, up from 29 percent who reported similarly in May.
Although sales and customer traffic levels softened somewhat in June, capital spending activity remained solid. Fifty-three percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, matching the proportion 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 101.7 in June – down from levels of 102.2 in both April and May. However, June represented the 20th consecutive month in which the Expectations Index stood above 100, which represents an optimistic outlook among restaurant operators for the months ahead.
Restaurant operators remain generally optimistic about sales growth in the months ahead. Forty-four percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 50 percent who reported similarly last month. In comparison, only 10 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, up slightly from 8 percent last month.
Restaurant operators are somewhat less bullish about the overall economy. Twenty-seven percent of restaurant operators said they expect economic conditions to improve in six months, while 18 percent expect the economy to worsen. The remaining 55 percent expect economic conditions in six months to be about the same as they are now.
For the tenth consecutive month, a majority of restaurant operators are planning for capital expenditures in the coming months. Fifty-nine percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down slightly from 62 percent who reported similarly last month.
The RPI is based on the responses to the National Restaurant Association’s Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor and capital expenditures. The full report is available online at Restaurant.org/RPI.
The RPI is released on the last business day of each month, and a more detailed data and analysis can be found on Restaurant TrendMapper, the Association’s subscription-based web site that provides detailed analysis of restaurant industry trends.
Source:- National Restaurant Association