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US Restaurant Performance Index declines in June

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Written by editor

WASHINGTON, DC – As a result of a somewhat dampened outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) declined in June for the second consecu

WASHINGTON, DC – As a result of a somewhat dampened outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) declined in June for the second consecutive month. The RPI – a monthly composite index that tracks the health of and outlook for the US restaurant industry – stood at 102.0 in June, down 0.4 percent from May and its lowest level in nine months. Despite the decline, June represented the 28th consecutive month in which the RPI stood above 100, which signifies continued expansion in the index of key industry indicators.

“Although same-store sales and customer traffic levels remained positive in June, the overall RPI declined as a result of dampened optimism among restaurant operators,” said Hudson Riehle, Senior Vice President of the Research and Knowledge Group for the Association. “The proportion of restaurant operators expecting sales growth fell to its lowest level in nine months, while operators’ outlook for the economy turned negative for the first time in nearly two years.”

The RPI is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction for key industry indicators. The Index consists of two components – the Current Situation Index and the Expectations Index.

Current Situation Index

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 102.5 in June – essentially unchanged from a level of 102.6 in May. In addition, the Current Situation Index stood above 100 for the 16th consecutive month, which signifies expansion in the current situation indicators.

• Same-store sales: A majority of restaurant operators reported higher same-store sales for the 16th consecutive month, as June’s results were similar to the May performance. Sixty-four percent of restaurant operators reported a same-store sales gain between June 2014 and June 2015, down slightly from 67 percent who reported higher sales in May. In comparison, 20 percent of operators reported a same-store sales decline in June, compared to 19 percent in May.

• Customer traffic: Restaurant operators also reported similar customer traffic results in May and June. Forty-seven percent of restaurant operators reported an increase in customer traffic between June 2014 and June 2015, down from 52 percent who reported higher traffic in May. Twenty-eight percent of operators said their traffic declined in June, compared to 31 percent in May.

• Capital spending: Along with positive same-store sales and customer traffic levels in recent months, capital spending remained at elevated levels. Sixty-four percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, which marked the ninth consecutive month in which a majority of operators reported making an expenditure.

Expectations Index

The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 101.5 in June – down 0.6 percent from May and the lowest level in nine months. Despite the decline, June represented the 32nd consecutive month in which the Expectations Index stood above 100, which indicates restaurant operators remain generally positive about business conditions in the coming months.

• Sales outlook: Restaurant operators’ optimism for sales growth dipped somewhat in recent months. Forty-two percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), which is down from 59 percent just three months ago. Meanwhile, 8 percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, compared to 9 percent last month.

• Overall economy: Meanwhile, restaurant operators’ outlook for the overall economy turned negative for the first time in nearly two years. Only 17 percent of restaurant operators said they expect economic conditions to improve in six months, down from 30 percent last month. Twenty-one percent expect economic conditions to worsen in six months, up from just 11 percent last month.

• Capital expenditure planning: For the 22nd consecutive month, a majority of restaurant operators said they are planning for capital expenditures in the months ahead. Fifty-nine percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 54 percent who reported similarly last month.