Experts say the U.S. restaurant industry’s pain is likely to continue after sales dropped by nearly a quarter in March as the coronavirus keeps dining rooms across the country closed and companies look to scrounge sales from take-out and delivery.
Nearly half a million restaurant workers lost their jobs in March in what experts say is the largest one-month employment decline on record for the industry and a sign of worse to come. Meanwhile, there are signs that federal relief measures to help businesses keep people on staff will not be enough.
Share prices for most of the largest publicly traded restaurant chains, however, rose in the last month, reflecting broader market gains despite the widespread economic pain from the virus and measures aimed at stopping it.
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Food services and drinking places sales plunged 23% from the year-ago period in March to a seasonally adjusted $48.56 billion, according to U.S. Census Bureau advance monthly estimates released April 15. By contrast, February sales for food services and drinking places grew 5.6% year over year.
The category represents one of the sectors hit hardest by coronavirus restrictions and includes bars, restaurants, caterers and other food service vendors such as McDonald’s Corp. and Starbucks Corp. All retail sales fell 6.2% from the year-ago period in March, down from the 4.1% year over year growth posted in March 2019.
After posting a record high of $66.2 billion in January, monthly sales at eating and drinking places fell to their lowest level since August 2014, and things could get even worse, the National Restaurant Association said in an April 15 note.
“While the March sales reading was historically bad, it is only the tip of the iceberg of what will be reported in April,” the trade group said. “With many mandated dining area closures and stay-at-home orders not taking effect until late-March or early-April, the magnitude of restaurant sales losses will be much more significant in April.”
Restaurant sales plunged in March, demonstrating the severe impact of COVID-19, which was only partially captured in the data, Jake Bartlett, a SunTrust Robinson Humphrey analyst, said in an April 15 note.
“The dip in restaurant sales growth stands in stark contrast to retail sales,” Bartlett said.
March marked the first time in at least a year when retail sales did not grow year over year. It was also the first time since August 2019 that the year-over-year growth of restaurant and bar sales did not outperform the broader retail sector’s growth.
Since March 23, seated diners dropped 100% each day in the U.S. and globally from the same days a year ago, according to data from reservation platform OpenTable. Business restrictions around the world have shuttered dining rooms and raised the stakes of the pandemic for companies that were more focused on dine-in sales.
Food services and drinking places lost 417,400 workers in March for a seasonally adjusted total of 11.9 million, a 1.1% drop from the same time a year ago, according to the U.S. Bureau of Labor Statistics, or BLS.
The job losses reflect the initial effects of the coronavirus and efforts to contain it, though the survey that serves as the basis for the jobs report was done before many of the business closures that came in the second half of March, the BLS said. Unemployment benefits claims in the U.S. were 6.61 million for the week ended April 4, which followed 10 million new claims filed in the two weeks prior.
“It is likely that the net job losses in March stemmed more from a reduction in hiring than a sharp increase in layoffs,” the National Restaurant Association said in a note. “Restaurant operators likely saw the approaching economic uncertainty associated with coronavirus, and a lot of planned hiring activities ground to a halt.”
Total nonfarm industries lost 701,000 employees in March for a total of 151.8 million, but it was still a 1% increase from the same time a year ago.
As with April’s sales, the employment numbers and the restaurant workers they represent will likely fare even worse in April, the National Restaurant Association said.
“While a monthly drop of 417,000 jobs is truly astounding in historical terms, it is only a fraction of the restaurant job losses that will be reported in April,” the trade group said. “When the April employment report is released by BLS on May 8, eating and drinking place job losses are expected to number in the millions.”
Ten of the largest publicly traded U.S. restaurants posted stock gains in the month ended April 14, while share prices fell for five others, according to Market Intelligence. More broadly, the S&P Composite 1500 Restaurants subindex rose 5.1%, and the S&P Composite 1500 index grew 4.7%.
Shares of Wingstop Inc. rose 49.7% in the month ended April 14, the biggest percent change and gainer for the period. The Dallas, Texas-based chicken wing slinger reported April 7 that its domestic same-store sales grew 8.6% from Feb. 23 to March 28 and company-owned restaurant same-store sales grew 7% in the same period. The company said it was well-positioned to shift to 100% off-premise sales because of coronavirus restrictions: carry-out and delivery was about 80% of Wingstop’s sales mix before the COVID-19 outbreak and digital sales were about 40%, the company said.
“Guests have taken advantage of the delivery channel and, while we have seen a slight decline in overall transactions due to the loss of dine-in, growth in our average ticket has surpassed these transaction declines as we’re primarily serving meals for families,” Charlie Morrison, Wingstop CEO and chairman, said in an April 7 statement.
Cracker Barrel Old Country Store Inc.’s shares dropped 11.6% in the month ended April 14, marking the steepest decline among bigger public restaurant companies. Casual dining companies like Cracker Barrel that focused more on dining room sales are likely to be struggling to shift to all off-premise sales, experts have said. Cracker Barrel’s retail sales are expected to be disproportionately impacted by restaurant closures, Jeff Farmer, a Gordon Haskett Research analyst, wrote in an April 2 note.
Source: Thanks https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/dining-out-pandemic-spoils-march-us-restaurant-sales-experts-fear-worse-ahead-58025732