How Winter Weather is Impacting Restaurants
We All have to eat … and this year we have had a bad case of winter blues.
Wall Street analysts predict that rising heating bills will take a cut of already limited consumer discretionary spending, serving as a “crowding out” factor that will likely last through late spring.
Charles Grom, analyst with Sterne Agee, estimated in a report released Wednesday that natural gas bills — the primary source of heat for about half of U.S. households — will rise about 73 percent this winter, translating to about a 6-percent drag on consumer spending, with particular ramifications in the Midwest and Northeast.
The average heating bill in 2012 was about $768 for natural gas, but Grom projects this year’s spending will be closer to $1,326, and will impact spending into the spring, given the delay as consumers receive their heating bills.
“We’re incrementally concerned that retail sales could stay under duress, particularly given the ‘sticker shock’ impact from these higher bills,” he wrote.
It has been a bad winter, the second coldest since 1970, writes Grom, with the most snow in three years. Wisconsin, Minnesota and Iowa have experienced double-digit declines compared with last year, and Midwestern and Northeastern states have all suffered colder winter months compared to the previous year. Ironically, the warmest state was Alaska, Grom noted.
Grom pointed to Sonic as one brand that might be hit particularly hard by the weather, in part because of its drive-thru model, but also because almost 79 percent of the chain’s store base is in states hit by the cold.
Other analysts pointed to companies like Potbelly Corp., Bravo Brio Restaurant Group Inc., Panera Bread Co., Chipotle Mexican Grill Inc., Noodles & Company, and Del Frisco’s Restaurant Group Inc. as being vulnerable, based on locations in weather-impacted states.
The weather was largely to blame for negative Knapp-Track results in January, according to other analyst reports. The same-store sales index for casual dining fell 2.6 percent in January, a sequential improvement over the 6.1-percent decline the index showed in December. Casual-dining traffic fell 4.4 percent for the month, which was the same decline Knapp-Track reported in December.
Stephen Anderson, senior analyst for Miller Tabak + Co. LLC, predicted comparisons will be easier for restaurant companies in February and March. Fundamentally, Anderson sees an improving macroeconomic backdrop that will benefit restaurant companies despite the temporary weather volatility.
“We argue continued improvement on payrolls and thus on discretionary income remain more powerful longer-term indicators on the health of the restaurant sector,” he wrote.
Barring unforeseen shocks, like a spike in fuel prices, he said, “we expect a sustained rebound in the same-restaurant sales in the next couple of quarters to the positive 1 percent to 2 percent range.”
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