Restaurant Comps Set Records In December

The restaurant industry's monthly same-store sales growth rate rose at an all-time-high in December, fueled by sharp gains in guest traffic and cooperative weather, according to the latest NRN-MillerPulse survey.

Industrywide same-store sales rose 5.4 percent in December, compared with a 2.9 percent increase the month prior, which is the largest increase in the survey's history. The month capped off a relatively strong 2011 that saw same-store sales up 2.6 percent overall, leaving operators and analysts pleasantly surprised.

"December was a win across the board," said Larry Miller, restaurant securities analyst at RBC Capital Markets in Atlanta and creator of the monthly MillerPulse surveys and research. "This could be the first sign of the rising tide that we've been waiting to see."

MillerPulse, an operator survey exclusive to Nation's Restaurant News, polled around 70 restaurant operators in January regarding December sales, profit trends, performance, and outlooks. Respondents cover all regions of the country and represent the quick-service, casual-dining, fine-dining, and fast-casual segments. Those surveyed in January represented restaurants that booked about 4 percent of industry sales.

Both the quick-service and full-service segments posted record-setting increases in same-store sales, the survey found. Sales at quick-service restaurants, which include both fast-food and fast-casual brands, rose 6.7 percent in December, compared with a 4-percent increase November. Sales for full-service restaurants, which include both fine-dining and casual-dining brands, increased 4.2 percent in December, compared with a 2-percent increase in the prior month.

The substantial sales increases were largely driven by guest traffic gains, which rose nearly 3 percent in December, compared to being relatively flat in November. Quick-service traffic jumped 4.2 percent in December, compared to just more than a 1-percent increase in November, while full-service traffic rose 1.7 percent after seeing a 1.1-percent decline in November.

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Mild weather compared to 2010 played a significant role in the traffic increase, Miller said.

"Mother nature took pity on the restaurant industry," he said. "When we asked operators what they think helped drive traffic and sales increases, a lot of them said the favorable weather played a big part."

As in the past, high commodity costs continue to be operators' number one concern, resulting in bearish outlook for restaurant margins over the next six months. Operators are expecting 2.3 percent food inflation in 2012, causing a net 6 percent of operators to expect margins to contract over the next six months — that number is based on the percentage of operators who feel margins will increase versus those that believe they will worsen. While still a concern, the number is a vast improvement from the 20 percent in November who believed margins would contract over the next six months.

"If same-store sales stay strong like this, we are going to see positive margin growth," Miller said. "It's looking like profits might be better than I originally thought for 2012."

And while a net 3 percent of operators expect January sales to be weaker than December, that is to be expected coming out of a holiday month, Miller said, and the small number reflects a feeling of optimism amongst operators who have already reported seeing positive same-store sales figures for January.

— Charlie Duerr, NRN.com

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