In our quarterly earnings overview series for restaurant stocks—like Yum! Brands (YUM), Bloomin’ Brands (BLMN), Chipotle Mexican Grill (CMG), and Brinker International (EAT)—and the Consumer Discretionary Select Sector SPDR (XLY), we’ve learned that same-store sales is one of the most important revenue drivers for a restaurant. It helps us determine growth in sales from the existing locations.
It’s important to note that XLY holds 4% of McDonald’s (MCD).
The NRA’s (National Restaurant Association) monthly survey is spread over 400 plus restaurant operators in the US. The above chart shows the current health and expectations for restaurant same-store sales.
The NRA’s Current Situation Index for same-store sales stood at 105.2 in December 2014—compared to 103.5 in November. According to the NRA, 71% of the operators reported a gain in same-store sales over this period and 19% reported a decline. The current situation same-store sales have been above 100 levels since March 2013. This demonstrates an expansion over 21 consecutive months.
The restaurant operators’ six-month outlook is reflected in the Expectations Index. It was 104.3—down from 105 month-over-month. Expectations on same-store sales have been above 100 levels for over 60 consecutive months.
According to the NRA, 52% of operators have a positive expectation about the next six-month same-store sales—down from 57% in November 2014. Also, 5% expect to have a same-store sales decline—compared to 7% in November 2014.
Higher expectations are a catalyst for initiatives like increasing capital expenditures to open new restaurants. We’ll discuss this in the next part of this series.