Expectation On Restaurant Performance Increases



NRA same-store sales

In the last part of this series, we covered the Restaurant Performance Index, which is a composite of the following two equally weighted indices: the Current Situation Index and the Expectations Index.


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In October 2014, the Current Situation Index was 103.1, which increased from 101 in September. This is a backward-looking measure based on the past trends of its components such as same-store sales, traffic, capital expenditure, and labor. The index has been above 100 since March 2014.

The Expectations Index was 102.9, which also increased month-over-month from 100.9 in September. This is a forward-looking measure that indicates the restaurant operators’ outlook for the next six months of its indicator components such as same-store sales, employees, capital expenditures, and business condition.

Takeaway for the restaurant industry

Both indices indicate an expansionary period for restaurants. The Current Situation Index indicates the current health of the industry, in which restaurants have advanced their operations by adding more sales and labor as well as more stores by incurring capital expenditures.

But despite this positive uptrend, casual dining restaurant stocks such as Darden Restaurants (DRI), Bloomin Brands (BLMN), Brinker International (EAT), and DineEquity (DIN) have faced a slowdown due to a shift in customer preferences and newer concepts such as fast-casual restaurant Chipotle Mexican Grill (CMG). To take advantage of several restaurant concepts, you may consider the ETF Consumer Discretionary Select Sector SPDR (XLY).

Let’s now go deeper into the key indicators that make up the above two indices.


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