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Dining out: April US restaurant sales fell nearly 50% amid widespread closures

U.S. restaurant and bar sales plummeted nearly 50% in April as coronavirus business restrictions continued to keep dining rooms shuttered and most people wary of public spaces.

The sales decline brought spending at eating and drinking places to its lowest level since October 1984, according to the National Restaurant Association. Meanwhile, more than 5 million food service employees lost their jobs in April.

As part of its ongoing response to the crisis, the U.S. eased eligibility criteria for the Federal Reserve's Main Street Lending Program, and Congress is debating a $3 trillion relief package that Democrats proposed May 12.

Shares of several major restaurant companies rose in the month ended May 14, with some reporting improving same-store sales trends as executives consider how and when to resume operations.

"Dining room re-openings this month are the next test for recovery," said Morgan Stanley analyst John Glass in a May 15 report.

April showers

Sales for food services and drinking places fell 48.7% in April from the year-ago period to a seasonally adjusted $32.36 billion, according to U.S. Census Bureau advance monthly estimates released May 15. April's sales continue a decline from the previous month when food services and drinking places sales fell a revised 26.7% year over year.

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The category is among the hardest hit by coronavirus restrictions and includes bars, restaurants, caterers and other food service vendors such as Denny's Corp., Jack in the Box Inc. and Starbucks Corp.

All retail sales fell 21.6% from the year-ago period in April, down from the 3.9% year-over-year growth posted in April 2019.

"With restaurant dining areas shuttered throughout most of the country, consumers had no choice but to allocate their food spending elsewhere in recent weeks," the National Restaurant Association said May 15. "While takeout and delivery options offered many restaurants a bit of a lifeline, it by no means made up for the mandated elimination of on-premises traffic."

Traffic to restaurants for sit-down dining remains nearly nonexistent, though the worst of the closures appear to be easing. Based on data from the reservation platform OpenTable, in-person dining across the U.S. dropped 94.9% year over year as of May 14, though the figure is a slight improvement from near-total dropoffs just days earlier.

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In-restaurant dining returned to 21 states as of May 11, and 19 out of 42 state stay-at-home orders expired as of May 12, according to Gordon Haskett analyst Jeff Farmer.

In Alabama, where restaurants and bars were allowed to reopen May 11, seated diners were down 77% year over year on May 13, while in New York, the figure was down 100%, according to OpenTable.

Still, some worry that reopening businesses too soon could worsen the pandemic. Alabama reported May 15 that it tested 144,422 people total and found 11,101 confirmed cases of coronavirus, up from the 10,700 total cases it reported out of 138,103 tested the day before.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Similar to other large publicly traded restaurant companies, Denny's reported May 14 improving same-store sales trends in the U.S. After being down 79% for the week ended April 1, Denny's U.S. same-store sales were down 68% the week ended May 6.

"We do not expect things to return to where they were anytime soon," said Denny's CEO John Miller during a May 14 post-earnings call. "One of the things sort of big picture that are going on, of course, is the heightened desire for convenience through technology, pickup delivery and family bundled meals."

Fast-food spots with drive-thru or delivery operations are performing relatively better than casual dining eateries, Morgan Stanley's Glass said. Even as there are signs that demand for restaurants is reviving, other factors to consider are the outsize impact of stimulus money and pent-up demand, along with the fact that people had fewer places to spend their money, Glass said.

"This could mean that restaurants received a disproportionate amount of consumer wallet share," Glass said. "We wouldn't be surprised to see some of that spending reallocated."

Chopped

Food services and drinking places lost 5.5 million workers in April for a seasonally adjusted total of 6.4 million, a 46.9% drop from the same time a year ago, according to the U.S. Bureau of Labor Statistics. April's declines followed a loss of 425,500 jobs in March.

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Total nonfarm industries, meanwhile, lost 20.5 million employees in April for a total of 131 million.

The decline in the number of restaurant jobs coincided with broader economic pain caused by the coronavirus and the efforts to contain it. However, the leisure and hospitality sector was hit with particularly heavy job losses, the Bureau of Labor Statistics said. People in the U.S. filed nearly 2.98 million unemployment claims in the week ended May 9, which added up to an unprecedented total of 36.5 million since the coronavirus shutdown began in March.

April's jobs numbers for food services and drinking places was the sector's lowest employment level since May 1989, according to the National Restaurant Association. The business group, which expects the job losses to continue mounting, estimated April 20 that more than 8 million restaurant employees had been laid off or furloughed since the start of the coronavirus outbreak in March.

"Regardless of the final tally, the current magnitude of job losses effectively erased over three decades of restaurant job growth — albeit with the expectation that many of these jobs will return as the economy continues to reopen," the National Restaurant Association said May 8.

The job losses come as groups like Fight for $15 and the Service Employees International Union pressure restaurant companies to do more to respond to worker health and safety concerns. McDonald's Corp. is facing increased scrutiny as workers held strikes in several cities throughout March and April, Business Insider reported.

While attracting labor has not been an issue for most chains, it remains an ongoing concern, especially for fast-food companies where turnover is high even under normal conditions, Morgan Stanley's Glass said.

Jacked up

Twelve of the largest publicly traded U.S. restaurants posted stock gains in the month ended May 14, while share prices fell for two others, according to Market Intelligence. More broadly, the S&P Composite 1500 Restaurants subindex rose 1%, and the S&P Composite 1500 index crept up 0.1%.

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Shares of Jack in the Box rose 47.7% in the month ended May 14, the biggest swing and gain for the period. Executives for the San Diego, Calif.-based quick-service restaurant chain said May 14 that same-store sales turned positive for the four weeks ended May 10 and were up over 8% for the week ended May 10.

"I think a lot of it really comes down to it's a safe transaction for the consumer and the employee," Jack in the Box CEO and Chairman Leonard "Lenny" Comma said during a post-earnings call May 14. "It's an efficient sort of convenience-oriented transaction right now."

Shares of both Cracker Barrel Old Country Store Inc. and McDonald's each fell 4.7% for the month ended May 14. Cracker Barrel's woes are in line with its casual dining peers that had previously focused more on on-site dining sales. McDonald's is testing the waters with resuming some operations in Canada the U.K. and Ireland.