Sales Rebound Optimism Short Lived; July Restaurant Sales Tumble

Restaurant sales dropped again in July, dealing a blow to an industry that had shown modest signs of improvement in recent months. Same-store sales were down -2.8 percent, a sharp 1.8 percentage point decline from June. The drop was disappointing in light of the -1.3 percent average comp sales for the first six months of the year and -1.6 percent recorded in the last half of 2016. These insights come from TDn2K™ data through The Restaurant Industry Snapshot™, based on weekly sales from 28,500+ restaurant units, 155+ brands and representing $68+ billion dollars in annual revenue.

Same-store traffic declined -4.7 percent in July, a 1.7 percentage point drop from June.

“July proved to be a tough month for chain restaurants,” commented Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K. “Based on recent trends, we were cautiously optimistic that the tide was turning a bit, especially since brands were comparing against weaker comps in 2016.” Calculated on a two-year basis, sales in July 2017 were down -4.2 percent compared with July of 2015. Same-store traffic was -8.7 percent for that same period. These are the weakest two-year growth rates in over three years, additional evidence that the industry has not reversed the downward trend that began in early 2015.

Consumers Spending on “Vacation”

“While the economy keeps growing at a moderate pace and job gains remain strong, the consumer seems to be on vacation – literally and figuratively,” said Joel Naroff, President of Naroff Economic Advisors and TDn2K economist. “One of the clearest indicators that households are spending cautiously is the softening of big-ticket purchases. In July, for the eleventh month out of the last twelve, vehicle sales were below the rate posted the year before. Home sales, while still trending up, are now expanding at a decelerating pace.”

“It is likely that consumption will improve, as confidence seems to have stabilized and income growth is improving. But households are currently maintaining their lifestyles by reducing their savings rate and that is likely restraining spending on discretionary goods. We may have to wait until the fall or early winter, assuming wage gains accelerate by then, to see any pick up in…

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