As a result of softer sales and customer traffic levels and dampened optimism among restaurant operators, the National Restaurant Association’s (NRA) Restaurant Performance Index (RPI) registered a sizable decline in April. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.3 in April, down 1.5% from a level of 101.8 in March.
NRA said April’s sharp decline in the RPI was the result of broad-based drops in both the current situation and expectations indicators.
“Restaurant operators reported a net decline in same-store sales and customer traffic, which followed stronger results in March. In addition, restaurant operators’ six-month outlook for both sales growth and the economy retrenched from more positive readings in recent months,” the group noted.
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 RPI 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 99.1 in April – down 2.3% from a level of 101.4 in March. April represented the sixth time in the last seven months with a reading below 100, which signifies contraction in the current situation indicators.
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 April – down 0.7%from March. Although the Expectations Index remained above 100 – signaling the anticipation of generally positive business conditions in the months ahead – it declined to its lowest level in six months.
Softer same-store sales, customer traffic
Restaurant operators reported a net decline in same-store sales for the sixth time in the last seven months. Thirty-four percent of restaurant operators reported a same-store sales increase between April 2016 and April 2017, down sharply from 57% of operators who reported higher same-store sales in March. Forty-seven percent of operators said their sales declined in April, up from 30% who reported similarly in March.
Restaurant operators also reported softer customer traffic levels in April. Only 26% of restaurant operators reported an increase in customer traffic between April 2016 and April 2017, down from 41% of operators who reported higher traffic in March. Fifty-two percent of operators reported a decline in customer traffic in April, up from 38% in March.
While sales and customer traffic results were uneven in recent months, capital spending activity remained generally consistent. Sixty-one percent of restaurant operators said they made a capital expenditure for equipment, expansion, or remodeling during the last three months, which was roughly on par with the readings during the previous two months.
Generally positive expectations for sales outlook
Although restaurant operators reported mixed same-store sales and customer traffic levels in recent months, they are generally positive about their prospects for business in the months ahead. Thirty-seven percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down slightly from 41% who reported similarly last month. Only 9% of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, while 54% of operators think sales will remain about the same.
In contrast, restaurant operators’ outlook for the economy is not as bullish as it was in recent months.
Twenty-two percent of restaurant operators said they expect economic conditions to improve in six months, down 15% from the reading in December 2016.Twelve percent of operators expect economic conditions to worsen in six months, while about two-thirds think conditions in six months will be about the same as they are now.
The data show a majority of restaurant operators are planning for capital expenditures in the months ahead. Fifty-six percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down slightly from 58% of operators who reported similarly last month.