How Economic Activity Affects Restaurant Same-Store Sales Growth



Same-store sales growth

All the indicators we discussed so far in this series affect restaurants, and the key driver that captures the impact of these indicators is restaurant same-store sales growth metric. When consumer confidence is negatively affected, consumers visit restaurants less frequently.

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Change in same-store sales growth

In the chart above, you can see the same-store sales trend over five quarters. For most restaurants, same-store sales have not declined during the most recent quarter in 2Q15. Traffic, which is the number of consumers visiting a restaurant, has declined across all restaurants.

Chipotle Mexican Grill (CMG), which has had the highest same-store sales growth, experienced negative traffic during its most recent quarter. However, newer restaurants such as Shake Shack (SHAK) and Habit (HABT) have experienced an increase in traffic. The Consumer Discretionary Select Sector SPDR ETF (XLY) holds 1% of Chipotle, 4% of McDonald’s (MCD), and 3% of Starbucks (SBUX) as a percentage of its total portfolio.

Despite the slowdown or negative traffic, same-store sales growth was higher year-over-year. The increase in same-store sales for most restaurants during the quarter was a result of an increase in menu prices that most of the restaurants took in the recent period to cover food and wage inflation. Please refer to A Comparative Analysis of 8 US Fast Casual Restaurants for in-depth details about these topics.

The impact of recent developments in the indicators discussed in this series will only be reflected in the 3Q15 earnings results. We will cover the 3Q15 earnings of most restaurants, so please check back.

What will happen if the Fed increases the target rate? We will look at this next.


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