Despite dampened sales and customer traffic levels as a result of extreme weather in parts of the country, the National Restaurant Association's Restaurant Performance Index (RPI) held relatively steady in February. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 102.6 in February, down slightly from a level of 102.7 in January. In addition, February marked the 24th consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators.
"With same-store sales and customer traffic levels being impacted by challenging weather conditions in parts of the country, the Current Situation component of the RPI declined in February," said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. "However, this was offset by a solid improvement in the Expectations component of the index, as restaurant operators are increasingly optimistic about business conditions in the months ahead. As a result, the overall RPI held relatively steady in February."
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.
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 102.0 in February – down from a level of 102.7 in January. Despite the decline, the Current Situation Index stood above 100 for the 12th consecutive month, which signifies expansion in the current situation indicators.
Although sales were dampened somewhat by extreme weather conditions in parts of the country, a majority of restaurant operators reported higher same-store sales for the 12th consecutive month in February. Sixty percent of restaurant operators reported a same-store sales gain between February 2014 and February 2015, down from 70 percent who reported higher sales in January. Twenty-four percent of operators reported a same-store sales decline in February, up from 17 percent in January.
Restaurant operators also reported dampened customer traffic results in February. Forty-seven percent of restaurant operators reported an increase in customer traffic between February 2014 and February 2015, down from 66 percent who reported higher traffic in January. Thirty-two percent of operators said their traffic declined in February, up from 21 percent who reported similarly in January.
Along with positive sales and customer traffic trends in recent months, restaurant operators ramped up capital spending. Fifty-nine percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, which marked the fifth consecutive month in which a majority of operators reported making an expenditure.
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 103.3 in February – up 0.5 percent from January's level of 102.8. In addition, February represented the 28th consecutive month in which the Expectations Index stood above 100, which indicates an optimistic outlook among restaurant operators for business conditions in the coming months.
Restaurant operators are increasingly optimistic about sales growth in the months ahead. Fifty-nine percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 57 percent who reported similarly last month. In contrast, only 4 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, unchanged from last month.
Restaurant operators are also generally optimistic about the direction of the overall economy. Thirty-seven percent of restaurant operators said they expect economic conditions to improve in six months, up slightly from 35 percent last month. Eleven percent expect economic conditions to worsen in six months, while the remaining 52 percent expect economic conditions in six months to be about the same as they are now.
For the 18th consecutive month, a majority of restaurant operators said they are planning for capital expenditures in the months ahead. Sixty-four percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, up from 57 percent who reported similarly last month.
The RPI is based on the responses to the National Restaurant Association's Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor and capital expenditures. The full report and video summary are available online at Restaurant.org/RPI.
Source: National Restaurant Association