There’s been talk of an economic recovery looming in the latter half of the year, and some restaurant industry measures are starting to point that direction.
The National Restaurant Association’s monthly measure of the current situation and outlook for the industry was its highest in more than two years, since November 2007. The association’s Restaurant Performance Index stood at 99 for February.
The index has been lower than 100 for 28 months, reflecting contraction in the industry. Scores above 100 reflect growth.
The uptick in the index can be attributed to restaurant operators’ expectations, not current sales and traffic counts, which remained soft. The Current Situation Index has been below 100 for 30 months, and was at 96.7 in February.
More than half of the operators, 57%, reported a same-store sales decline in February, compared with February 2009, while 28% reported sales gains. Fifty-five percent reported traffic declines.
Although the index found current capital spending activity to be scarce, 48% of operators are planning to make capital expenditures in the next six months, up from 43% in January.
The most optimistic sign in the survey, however, is in expectations for sales. Forty-four percent expect to have higher sales in six months, compared to 33% the month before.
Wall Street seems to be echoing these sentiments, with several chains outperforming the S&P 500 already this year. On March 26, Brinker International, which operates Chili’s and On The Border Mexican Grill & Cantina chain, increased its fiscal 2010 outlook, raised its dividend and authorized an additional $250 million for share repurchases, according to a company news release.
Brinker announced its plans to sell On The Border to OTB Acquisition LLC, an affiliate of Golden Gate Capital, earlier in March.
Excluding the effect of weather, the company reported an increase of 1.5% in comparable restaurant sales in March, compared to January and February combined, according to the release.
Third-quarter sales were up $70 million for Darden Restaurants, which include Red Lobster, Olive Garden and LongHorn Steakhouse, among others. Blended same-restaurant sales for the three chains increased 1.3% in the third quarter of fiscal 2010, which ended Feb. 28.
It marked the company’s first quarter of positive blended same-restaurant sales in almost two years, Clarence Otis, chairman and chief executive officer of Darden, said in a financial release.
The Wall Street Journal also noted high-end restaurants are seeing some rebound, at least back to 2008 levels.
But restaurants aren’t out of the woods just yet. Four affiliated Arby’s franchisees filed for Chapter 11 bankruptcy April 1, citing the economy and dropping sales as primary causes.
Other restaurant industry researchers, including Malcolm M. Knapp Inc.’s Knapp-Track index and Chicago-based firm NPD Group, continue to see sales and traffic declines, but still predict positive numbers by the third quarter of 2010.