Watch Retail Trade Data to Align Your Restaurant Investments



Retail trade data

Every month the United States Census Bureau releases retail trade data on food services and drinking places and grocery stores. It collects this data from retailers that provide sales and inventory dollar value data at the end of the month.


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Food and drinking sales versus grocery sales

Food and drinking places sales grew 8.2% in May 2015 compared to 6.2% in May 2014. Grocery store sales grew 3.1% in May compared to 2% in May 2014. But as you can see in the above graph, food and drinking sales are trending downward, and grocery sales are trending up. Month-over-month, food and drinking sales declined from 9% to 8.2%, and grocery sales grew from 3.0% to 3.1%.

Data can help align your restaurant portfolio

As people spend more to eat out, grocery spending decreases, and vice versa. A variety of retail trade data can help align your restaurant portfolio. During most of 2009, restaurant sales fell below grocery sales. It was a challenging economy, and people reacted by cooking more meals at home and eating out less.

As you watch the data, be aware that an increase in restaurant sales may not necessarily mean people are eating out more at restaurants. It could be the result of food inflation, which restaurants typically pass on to their customers by increasing menu prices.

Restaurants are part of the Consumer Discretionary Select Sector SPDR Fund (XLY). As you can see in the above graph, XLY was impacted more than the Consumer Staples Select Sector SPDR ETF (XLP). Grocery stores are part of XLP.

XLY holds ~1% of Chipotle Mexican Grill (CMG), ~4% of McDonald’s (MCD), 3% of Starbucks (SBUX), and 1.5% of Yum! Brands (YUM).

Mitigating the risk

According to the National Bureau of Economic Research, the United States experienced 11 business cycles from 1945 to 2009. Some of those cycles are recessionary. To soften the negative impact during recessionary cycles, some restaurants have placed their branded products in grocery stores. This helps mitigate lower restaurant sales in challenging economic conditions. Starbucks (SBUX), Dunkin’ Donuts (DNKN), Taco Bell under the umbrella of Yum! Brands (YUM), and Burger King (QSR) have their branded products in grocery stores.

In the next part of this series, we’ll look at two more indicators, the ICSC-Goldman Store Sales Index and the Johnson Redbook Retail Sales Index, and how they’ve performed.


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