Dining Out: U.S. Restaurant Sales Growth Accelerates in September

Sales growth for American bars and restaurants accelerated in September after a summer slowdown, according to an analysis by S&P Global Market Intelligence.

Employment in food services and drinking places increased in September as menu prices increased. Meanwhile, the stock prices of most of the largest publicly traded restaurants by market cap fell in the month ended October 18.

Restaurant sales growth accelerates

Sales of food services and drinking places rose 4.9% year-on-year in September to seasonally adjusted $ 65.16 billion, according to the US Census Bureau’s anticipated monthly sales estimates released on October 16. The category includes bars, restaurants, caterers and other types of food service vendors. .

September’s growth marked an acceleration from slower industry gains from May to August, although analysts said strong summer sales growth in 2018 made comparisons difficult. Sales growth in bars and restaurants also overtook the retail sector as a whole, which posted an increase of 4.1%, according to government data.

Much faster growth in limited-service restaurants has supported restaurant sales growth, which is expected to accelerate in the fourth quarter, according to Jake Bartlett, SunTrust analyst Robinson Humphrey..

Limited-service restaurants are businesses where consumers typically order and pay for food before eating it. Full-service restaurants are businesses that provide food services to consumers who order and are served seated.

The revised Census Bureau figures also pinned August sales growth at 2.9% from a year earlier on a preliminary basis, up from the anticipated estimate of 1.1%. July’s growth also rose to 3.5% in the Census Bureau’s revised sales figures for the month.

More restaurant and bar workers added

Food services and drinking places gained 1,500 employees in September for a seasonally adjusted total of 12.2 million workers, according to the US Bureau of Labor Statistics, or BLS. Total non-farm industries added 136,000 employees for a total of 151.7 million workers in September and the unemployment rate fell to 3.5%.

Hiring in restaurants and bars continued to outpace gains in the economy as a whole.

September’s hiring in food services and drinking places was up 2.2% year over year, compared to 1.9% in August. Total non-farm hiring, meanwhile, rose 1.4% in September from the previous year.

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The cost of restaurant meals is increasing

The cost of restaurant meals increased steadily in September thanks to the full-service meals and snacks category, but was offset by limited-service meals and snacks.

Prices in the “food outside” subcategory of the Consumer Price Index, or CPI, rose 3.2% in the year through September, according to the BLS. “Food outside the home” covers the average prices of meals ordered in restaurants.

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The CPI for full-service meals and snacks increased 3.2% over the same period, while limited-service meals and snacks increased 3%.

The CPI’s “home food” subcategory, which refers to average prices in grocery stores, increased 0.6% in the 12 months to September.

Headline inflation rose 1.7% during the year through September, according to the BLS.

Wendy’s adds more eggs to her basket

Most of the largest publicly traded U.S. restaurants recorded stock declines in the month ended Oct. 18, while stock prices rose for six of those companies, according to Market Intelligence. More generally, the S&P Composite 1500 Restaurants sub-index fell 2.9%.

Darden Restaurants Inc. posted a 13.1% share price decline for the month ended October 18. The company’s success at Olive Garden and LongHorn Steakhouse was offset by continued weakness at Cheddar’s, which recorded a 5.4% drop in same-store sales in its first quarter of fiscal 2020, a BTIG analyst Peter Saleh said in a September 19 report following the company’s earnings report on the same day.

“The occasional polite weakness and muffled industry commentary seemed to weigh on equities, however, offsetting what we saw as a very respectable quarter, and industry challenges are likely limiting opportunities for top outperformance this year.” , Saleh said.

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Meanwhile, shares of The Wendy’s Co. rose 7.4%, the biggest gain for major publicly traded restaurant companies in the month. Wendy’s announced on September 9 that it plans to expand its breakfast menu available in more than 300 locations across the United States in 2020.

“We expect the breakfast to be a success, due to strong performance in test markets, operational simplicity and franchisee alignment around the launch,” SunTrust’s Bartlett said in a report from October 14 released following the company’s investor day on October 11.

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