"Structural Change" is Coming
Here’s a succinct analysis of what’s hurting restaurant sales. It comes via Jeffrey Bernstein, a sharp restaurant analyst at Barclay’s Capital. In addition to recognizing there remain too many restaurants, Bernstein adds the following:
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1) Convenient, ready-to eat, high quality prepared alternatives from other food channels (i.e. supermarkets, warehouse clubs) further pressuring the share of consumer food dollar spent at restaurants. 2) Meaningful deflation in Food At Home relative to persistent inflation in the Food Away From Home. 3) Significant restaurant discounting, with total sales declines greater than traffic declines since May 2009, implying a negative average check/mix. 4) Pent up demand for broader consumer retail (i.e., back to school, holiday shopping), with no similar pent up demand for restaurant meal consumption. While difficult to discern primary from secondary drivers, the end result is a structural change in the restaurant industry, leading to a deceleration in eating out occasions [and] explaining the most recent return to restaurant comp underperformance, and therefore justifying the stock price underperformance at least through the end of 2009. [Boldface mine.] |
Re-read number 4: No similar pent-up demand for restaurant visits. And then, later, Structural change. Of course there’s little incentive to purchase food-away-from-home given the bleak employment figures and the outlook for re-employment. CREST data, not surprisingly, now show that consumers are using their microwaves more often.
Any turnaround in the employment situation is likely a long way off, i.e., beyond 2010. A disturbing article by so-called "Dr. Doom," economist Noriel Roubini, begins ominously: "Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%."
And ends: "As a result of these terribly weak labor markets, we can expect weak recovery of consumption and economic growth; larger budget deficits; greater delinquencies in residential and commercial real estate and greater fall in home and commercial real estate prices; greater losses for banks and financial institutions on residential and commercial real estate mortgages, and in credit cards, auto loans and student loans and thus a greater rate of failures of banks; and greater protectionist pressures."
If those expectations become reality … well, god help us.
Steve J commented:
broadstreetlicensing commented:
Steve J commented:
