Retail sales in the U.S. increased 0.5 percent in May compared to April, per an advance report from the United States Census Bureau. Compared to May of last year retail sales grew by 3.2 percent. In the first five months of this year retail sales increased 3.2 percent. In addition, April retail sales increased +0.3 percent compared to March, according to a Census Bureau revision. This marks a 0.1 percent increase compared to the initial report.
Sales at foodservice and drinking places increased 0.7 percent from April and up 3.7 percent compared to May of 2018, according to Census Bureau data. In the first 5 months of this year, foodservice and drinking place sales grew by 4.6 percent. The Census Bureau also revised foodservice sales up to +0.3 percent in April over March from +0.2 that was originally reported.
It interesting to note that May grocery store sales were flat compared to April and were up 1.7 percent compared to May of 2018. In the first 5 months of 2019 grocery store sales were up 2.4 percent.
The report seems to indicate U.S. consumers are opening their wallets. Since consumer spending is roughly two thirds of the economy, this month’s data is a positive sign.
This data comes with some limitations and cautions. Due to the data’s limited sample size, these are advanced numbers and are subject to revision. The sales data covers restaurants and bars only. The Census Bureau does not survey operators in the following segments: hotels, resorts, clubs, business and industry, healthcare, schools and colleges, and military. Some sales statistics are adjusted for calendar changes, holidays, weekends but not for menu price changes.
Economic News This Week
- Initial-jobless claims totaled 222,000, an increase of 3,000 for the week ending June 8. The 4-week moving average was 217,750, an increase of 2,500.
- The Producer Price Index for Total Final Demand increased 0.1 percent in May. In the past 12 months the index for total final demand increased 1.8 percent. The index for final demand goods increased 0.8 percent in May. Without food and energy, the index was flat. The food index was down 0.3 percent for the month.
- The Consumer Price Index increased 0.1 percent in May. The all-items index increased 1.8 percent in the last 12 months.
- Industrial production rose 0.4 percent in May, according to the Federal Reserve. The index for manufacturing increased 0.2 percent for the month. The Index for mining increased 0.1 percent. The index for utilities climbed 2.1 percent. Capacity utilization for the industrial sector increased 0.2 percent in May to 78.1, a rate that is 1.7 percentage points below its long run (1972-2018) average.
- The University of Michigan Index of Consumer Sentiment showed some consumer concern in the preliminary June report. The Index dropped from 100 in May to 97.9 in June. The study’s Current Economic Conditions Index edged up to 112.5 in June from 110 in May. The Index of Consumer Expectations declined to 88.6 from 93.5 in May. A spokesman from the University of Michigan said uncertainty about the tariffs on imported Chinese goods is the major negative influence on consumers.
Foodservice News This Week
- Food prices increased 0.3 percent in May, according to the Consumer Price Index. For the 12 months ending in May, food prices rose 2.0 percent. Food at home prices increased 0.3 percent while food away from home prices rose 0.2 percent. In the last 12 months, food at home prices have risen 1.2 percent and food away from home prices increased 2.9 percent.
- An activist investor continues to pressure Red Robin Gourmet Burgers. Vintage Capital owns about 13 percent of Red Robin’s stock and has written to the chain’s board proposing a review of “strategic alternatives” for the casual restaurant chain and urged recruiting a CEO. Vintage Capital also offered to buy the company for $40 per share.
- Perkins Restaurant & Bakery has filed for bankruptcy protection. The company, which is owned by the New York-based investment firm of Castle Harlan, said the court has given the restaurant chain permission to operate normally. So all 160 of the company’s franchised Perkins locations, 85 company-owned units and 37 franchised Marie Callender’s restaurants remain open. There is speculation that the chain will be put up for sale.
- Amazon will end its restaurant delivery service, which was operating in 20 U.S. cities. The company cited intense competition as the reason for abandoning the program. Amazon said the move will affect a small fraction of its employees and many have already found new positions within the company. This does not mean Amazon will walk away from restaurant delivery entirely, though. In May the company took a stake in British online food delivery system Deliveroo.
- Uber Eats prepares to test delivery drones in dense urban environments. Uber has been awarded the rights to test commercial food delivery by drone in San Diego. The initial test will be with McDonald’s but other restaurants part of the Uber Eats network will be included later. The drones will be involved in delivery only at the beginning and it is probable the last mile will be by a delivery driver.
- US Foods broke ground on a new distribution center in McClellan, Calif. The 355,000- square-foot facility is expected to open in late 2020 and will service Northern California.
- Corporate Stirrings: Church’s Chicken may be put up for sale. A report says the chain’s owner, private investment company FFL Partners in San Francisco, seeks around $350 million for the chicken chain and has hired an advisor to assist in the sale. Jack’s Family Restaurants is reportedly up for sale. Backed by Toronto-based Onex Partner’s, Jack’s operates 145 restaurants in the Southeast U.S. The chain could be valued at $800 million. A majority stake in Whataburger was purchased by the private equity firm of BDT Capital Partners LLC. Whataburger is headquartered in San Antonio, has more than 800 locations in 10 states and annual sales of greater than $2 billion. Financial terms of the sales were not given.
- Growth Chains: Dave & Buster’s will open 15 to 16 new locations this year, which translates to unit growth rate of 12 percent. Salata Salad Kitchen, with 85 restaurants in operation, now has 20 locations in development and expects to sign 25 new franchisees this year. L&L Hawaiian Barbecue plans to add roughly 20 restaurants in the greater Houston area. Tupelo Honey is looking to add two locations this year then add one a quarter in 2020 and 2021.
- Comparable Store Sales Reports: Casey’s General Store up 2.0 percent and Dave & Buster’s down 0.3 percent.
For details and same-store sales reports of other chains, please click here for the latest Green Sheet.