uploads///NRAs Current Situation vs Expectations on Comp Sales

Analyzing the Current Situation Index versus the Expectations Index



NRA’s Current restaurant situation vs. expectation

In the last part of this series, we covered the RPI (Restaurant Performance Index). It’s a composite of two equally-weighted indices:

  1. Current Situation Index
  2. Expectations Index

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In January 2015, the Current Situation Index stood at 102.7. It declined from 102.9 in December 2014. This is a backward-looking measure. It’s based on its components’ past trends—same-store sales, traffic, capital expenditure, and labor. It has been above 100 since March 2014.

The Expectations Index stood at 102.8. It also declined month-over-month from 102.9. This is a forward-looking measure. It indicates the restaurant operators’ outlook for the next six months for its indicator components—same-store sales, employees, capital expenditures, and business conditions.

Takeaways for the restaurant industry

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

Despite this positive uptrend, casual dining restaurant stocks—like Darden Restaurants (DRI), Bloomin’ Brands (BLMN), Brinker International (EAT), and DineEquity (DIN)faced a slowdown due to a shift in customer preferences and newer concepts like fast-casual restaurant Chipotle Mexican Grill (CMG).

To take advantage of several restaurant concepts you may consider the Consumer Discretionary Select Sector SPDR (XLY). XLY holds 37% of the retail portfolio.

In the next part of this series, we’ll discuss the key indicators that make up the above two indices.


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