Experts say the pain for the US restaurant industry is set to continue after sales fell nearly a quarter in March as the coronavirus keeps dining halls closed across the country and businesses look to snag take-out and delivery sales.
Nearly half a million restaurant workers lost their jobs in March in what experts say was the biggest one-month employment decline on record for the industry and a sign of worse to come. Meanwhile, there are signs that federal relief measures to help companies keep people on staff won’t be enough.
Share prices of most of the largest publicly traded restaurant chains have risen over the past month, however, reflecting broader market gains despite widespread economic pain from the virus and measures to stop it.
Food services and drinking places sales fell 23% from a year earlier in March to a seasonally adjusted $48.56 billion, according to U.S. Census Bureau monthly advance estimates released on May 15. April. In contrast, February sales for food services and drinking places rose 5.6% year over year.
The category represents one of the sectors hardest hit by coronavirus restrictions and includes bars, restaurants, caterers and other food service providers such as McDonald’s Corp. and Starbucks Corp. All retail sales fell 6.2% from a year earlier in March, down from the 4.1% year-over-year growth recorded in March 2019.
After posting a record $66.2 billion in January, monthly restaurant and drinking place sales fell to their lowest level since August 2014, and things could get even worse, the National Restaurant Association said in a note from April 15.
“While the March sales reading was historically poor, this is just the tip of the iceberg of what will be reported in April,” the trade group said. “With many mandatory dining room closures and stay-at-home orders not taking effect until late March or early April, the magnitude of restaurant sales losses will be much greater in April.”
Restaurant sales fell in March, demonstrating the severe impact of COVID-19, which was only partially captured in data, Jake Bartlett, an analyst at SunTrust Robinson Humphrey, said in an April 15 note.
“The decline in restaurant sales growth contrasts sharply with retail sales,” Bartlett said.
March marked the first time in at least a year that retail sales did not rise year over year. It was also the first time since August 2019 that year-over-year growth in restaurant and bar sales did not outpace growth in the overall retail sector.
Since March 23, seated diners have dropped 100% every day in the United States and around the world compared to the same days a year ago, according to data from reservations platform OpenTable. Trade restrictions around the world have closed dining rooms and raised the stakes of the pandemic for businesses that have focused more on restaurant sales.
Food services and drinking places lost 417,400 workers in March for a seasonally adjusted total of 11.9 million, down 1.1% from the same period a year ago, according to the Bureau of Labor United States Statistics, or BLS.
The job losses reflect the initial effects of the coronavirus and efforts to contain it, although the survey that forms the basis of the jobs report was carried out before most of the business closures that occurred in the second half of March, the BLS said. Claims for unemployment benefits in the United States were 6.61 million for the week ended April 4, after 10 million new claims were filed in the previous two weeks.
“It is likely that the net job losses in March resulted more from a reduction in hiring than a sharp increase in layoffs,” the National Restaurant Association said in a note. “Restaurant operators have likely seen the approaching economic uncertainty associated with the coronavirus, and many planned hiring activities have come to a halt.”
Total non-farm industries lost 701,000 employees in March for a total of 151.8 million, but that was still a 1% increase from the same period a year ago.
As with April sales, the jobs numbers and the restaurant workers they represent will likely be even worse in April, the National Restaurant Association said.
“While a monthly decline of 417,000 jobs is truly staggering in historical terms, it is only a fraction of the restaurant job losses that will be reported in April,” the trade group said. “When the April jobs report is released by the BLS on May 8, restaurant and bar job losses are expected to number in the millions.”
Ten of the largest publicly traded U.S. restaurants posted stock market gains in the month ended April 14, while stock prices fell for five others, according to Market Intelligence. More broadly, the S&P Composite 1500 Restaurants sub-index rose 5.1% and the S&P Composite 1500 index rose 4.7%.
Shares of Wingstop Inc. rose 49.7% in the month ended April 14, the largest percentage change and gain for the period. The Dallas, Texas-based chicken wing launcher announced on April 7 that its nationwide same-store sales increased 8.6% from February 23 to March 28 and that sales at restaurants owned by the company had increased by 7% during the same period. The company said it was well positioned to move to 100% offsite sales due to coronavirus restrictions: Transportation and delivery accounted for about 80% of Wingstop’s sales mix before the COVID-19 outbreak. 19 and digital sales were around 40%, the company said.
“Customers have taken advantage of the delivery channel and while we have seen a slight decline in overall transactions due to the loss of catering, our average ticket growth has exceeded these transaction declines as we primarily serve meals for families,” Charlie Morrison, CEO and president of Wingstop, said in a statement on April 7.
Shares of Cracker Barrel Old Country Store Inc. fell 11.6% in the month ended April 14, marking the steepest decline among major public food service companies. Casual dining businesses like Cracker Barrel that focus more on in-dining sales are likely to struggle to transition to all off-site sales, experts said. Retail sales at Cracker Barrel are expected to be disproportionately affected by restaurant closures, wrote Jeff Farmer, an analyst at Gordon Haskett Research, in an April 2 note.