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Dining out: US restaurant sales growth again outpaces retail in November

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Dining out: US restaurant sales growth again outpaces retail in November

Year-over-year sales growth for U.S. bars and restaurants in November again outpaced overall retail spending gains for the third month in a row, according to an analysis by S&P Global Market Intelligence.

Food services and drinking places kept adding jobs in November at a higher rate than the broader economy and menu prices continued ticking up. Meanwhile, share prices for the bulk of the 15 largest publicly traded U.S. restaurants by market capitalization rose in the month ended Dec. 13.

Sales climb continues

Food services and drinking places sales grew 5.1% from the year-ago period in November to a seasonally adjusted $65.22 billion, according to U.S. Census Bureau advance monthly sales estimates released Dec. 13. The category includes bars, restaurants, caterers and other food service vendors such as McDonald's Corp. and Starbucks Corp.

All retail sales grew 3.3% in November from the year-ago period, down from the 4.1% year-over-year growth posted in November 2018. November marked the third straight month that sales at restaurants and bars had faster year-over-year growth than overall retail sector sales.

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In October, food services and drinking places sales grew 5.1% from the year-ago period to a seasonally adjusted $65.43 billion on a preliminary basis, up from a previous estimate of 4.7% year-over-year growth. Sales in September were revised down to 5.9% year-over-year growth from a previous estimate of 6%.

Restaurant sales growth has been supported by faster growth at limited service restaurants, said Jake Bartlett, a SunTrust Robinson Humphrey analyst, in a Dec. 13 report.

November's results for restaurant sales represent the sustained trend of moderate growth after September's high and a weaker fourth quarter in 2018, said B. Hudson Riehle, senior vice president of the National Restaurant Association's research and knowledge group, in an interview.

"The positive performance definitely continues," Riehle said.

Labor force expands

Food services and drinking places added 25,300 workers in November for a seasonally adjusted total of 12.3 million, up 2.6% from a year ago, according to the U.S. Bureau of Labor Statistics, or BLS.

Total nonfarm industries added 266,000 workers in November for a total of 152.3 million workers, a 1.5% increase from the year-ago period. The unemployment rate in November was 3.5%.

Labor issues — recruitment, retention and costs — continue to be among the top challenges that many restaurant operators cite, Riehle said.

McDonald's agreed in November to pay $26 million to settle a class-action lawsuit over pay and working conditions of its staff, The Associated Press reported. This month the National Labor Relations Board directed an administrative law judge to approve settlements resolving complaints against McDonald's USA LLC, McDonald's Restaurants of Illinois Inc. and 29 franchisees based on violations allegedly committed by McDonald's Restaurants of Illinois and the franchisees.

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Dining out costs continue to increase

The cost of dining out continued to grow in November.

Prices for the "food away from home" subcategory of the consumer price index, or CPI, grew an unadjusted 3.2% for the year through November, according to the BLS. "Food away from home" covers the average prices for meals ordered at eateries.

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The CPI for full-service meals and snacks grew 3.6% in the year through November, while limited-service meals and snacks rose 3%. The full-service meals and snacks category includes restaurants where patrons are waited on at their tables, and the limited-service category covers eateries where people pay for their food up front.

The "food at home" subcategory of the CPI, which refers to average prices at grocery stores, grew 1% in the 12 months through November.

Restaurant stocks heat up

Nine of the 15 largest publicly traded U.S. restaurants posted stock gains in the month ended Dec. 13, while share prices fell for the six other companies, according to Market Intelligence. More broadly, the S&P Composite 1500 Restaurants subindex grew 2.7%, and the S&P Composite 1500 index grew 2.4%.

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Wingstop Inc. posted a 17.2% share price increase in the month ended Dec. 13. The Dallas-based chicken wing venture recently tested new kitchen equipment that reduces cook times, a development that could transform the business by opening up real estate the company otherwise would have avoided, Peter Saleh, a BTIG analyst, said in a Dec. 3 report.

Shares in Bloomin' Brands Inc. fell 5.5%, the biggest decline among the top publicly traded restaurant companies during the month ended Dec. 13. The company behind Outback Steakhouse and Carrabba's Italian Grill announced Nov. 6 that it was exploring strategic alternatives to maximize value for its shareholders, including a possible sale, and Bloomin' Brands reported that third-quarter same-store sales growth declined 0.2%.

"While comps were disappointing, we believe a slowdown was widely expected by investors given broader casual dining trends, and are encouraged by the implied rebound expected in the fourth quarter," said Sharon Zackfia, an analyst at William Blair, in a Nov. 6 report.