Restaurant recession looming? Debate begins

03/08/2016
The restaurant industry is heading for a downturn, according to one industry analyst interviewed Tuesday for Bloomberg.com. Stifel Analyst Paul Westra's prediction, however, leaves out the pizza sector.

The dire second-quarter results from 15 of 16 major food service chains is the basis for Westra's argument. He pointed out that they have shown either a dip in sales or slowed growth from the previous quarter.
Other industry experts, including the National Restaurant Association chief economist, Bruce Grindy, disagreed saying that it was far too early to make such a prediction.
"In the June 2016 Tracking Survey, only 12 percent of restaurant operators said they expect economic conditions to improve in six months, while 25 percent said they think conditions will worsen," said Grindy, who regularly monitors this type of sentiment among NRA members.
Although he admitted that restaurant operators are showing concern about the economy, it hasn't reached the level that typically ends up leading into a recession of any kind for the industry.
"While the recent outlook has certainly been a mixed bag, it is not quite bearish enough to signal that a recession is on the horizon. … History tells us that we would need to see negative economic sentiment of at least 35 percent to reach that tipping point," he said.
For further proof of this type of setpoint for industry recession, Grindy provided a graph showing numbers during the Great Recession nine years ago, when restaurant operators’ economic negativity jumped to more than 40 percent and remained above 35 percent until 2009, when the economy began improving. That, according to Grindy, suggests that this measure is a fairly accurate one when it comes to overall industry direction.
"Restaurant operators are on the front line of the U.S. economy, and are often the first to notice any changes in consumer behavior or economic conditions," Grindy said. "With that in mind, operators’ current level of concern about the economy does not suggest that a recession is imminent."
Another assertion in the Bloomberg article is that the pizza industry's continued stellar performance may be proof that we are heading into a Bear market. It stated, for example, that the only chain in the Bloomberg Intelligence restaurant index reporting at the time of Banjo's article to document sales growth was Domino's, while other players in that sector are reporting earnings, including Papa John's – whose Q2 results can be found here.
"Pizza chains typically do well when consumers cut spending due to their value proposition — there aren’t many ways to feed a family on $7.99, which is what a three-topping large pie will run you at Domino’s," Bloomberg Intelligence Analyst Michael Halen said in Banjo's article.
Much of Domino's leadership in the pizza sector is credited to its progressive online ordering features, as well as the recessionary trend predicted elsewhere in the food service industry. There may be more to the story, said Domino's Communications Director Tim McIntyre.
"It is difficult to say that we are benefiting from any potential 'restaurant recession,' especially as we have seen 21 consecutive quarters of positive same-store sales growth (and seven consecutive years of positive sales) domestically," he said when contacted by pizzamarketplace.com this morning via email. "Following the premise implied here (in the article), it’s being argued that we’ve been benefiting from something other than our own efforts, for seven years now. I don’t think that’s the quite the case. We’ve got a track record of success, and we try to build on that."
Attempts to reach others in the market, particularly Yum! Brands, which might have a view across a wider industry sector, have not been answered.

Fonte:http://www.fastcasual.com/articles/restaurant-recession-looming-debate-begins/

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