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Restaurant Monthly Update M a R C H 2 0 1 8 Restaurant Monthly Update M a r c h 2 0 1 8 1 Duff & Phelps Restaurant Monthly Update | March 2018 KEY Market Update INFORMATION Following an uptick in December, same-store sales (SSS) in January and February fell back into negative territory. Although January’s (0.3%) and February’s (0.8%) SSS declines reflect an improvement over the (1.1%) growth rate reported for 2017. The last two months have reversed the positive momentum experienced in Q4 2017, and have revived concerns that the industry may not yet be positioned for sustained growth. Same-store traffic declined (3.0%) in January and (3.1%) in February, February SSS fell by (0.8%) while respectively; representing the worst performance since September 2017. comparable traffic slid (3.1%) Although traffic dropped by only (0.1%) compared to January, the negative effect on sales was amplified by a significant slowdown in the growth of guest checks. However, favorable macroeconomic conditions, strong consumer confidence, and the fact that some of the decline in February sales could be attributed to factors external to the industry, fuels optimism for increased restaurant spending in upcoming months. Fast casual was the top performing Severe winter storms and record rainfall hit large regions of the U.S., segment for the first month in three years primarily in the Midwest and East Coast, causing significant losses in restaurant sales during the last two months. The three worst performing regions were the Mid-Atlantic, Midwest and New England, each experiencing more than (2.0%) declines in SSS. If sales from these three regions were excluded from all calculations, restaurant sales would have remained essentially flat. In addition to weather, the Winter Olympics Year-over-year job growth sank (1.0%) (which captured the attention of almost 20 million Americans nightly for two in January weeks) and Valentine’s Day falling on Ash Wednesday, were believed to negatively impact sales during the period. February results were soft across the industry and all segments, including fine dining, reported negative sales. Fast casual was the top performing segment in February, a welcomed improvement in its relative sales performance. Although fast casual continues to gain market share through January turnover saw negative results, new unit openings, it has not been the top performing segment in SSS as hourly employee and manager since the beginning of 2015. Fine dining, which led the industry in SSS for turnover rose 2017, experienced a dramatic downturn in February, posting its third-worst month in three years. The external factors noted earlier could have been particularly troublesome for this segment. Page 2 Source: Nation’s Restaurant News, TDn2K’s Black Box Intelligence report and The Wall Street Journal. Duff & Phelps Restaurant MonthlyCapital MarketsUpdate Industry | March Insights | 2018Q1 2016 Restaurant Sector Monthly Same-Store Sales and Traffic Growth 8.0% Same-Store Sales Traffic 6.0% January and February marked a reversal from the positive momentum seen in Q4 2017, while traffic has been in a 4.0% continuous state of decline since January 2015. 2.0% 0.9% 0.7% 0.3% 0.0% 0.0% (0.0%) (0.5%) (0.6%) 0.0% (0.8%) (0.9%) (1.0%) (1.0%) (1.1%) (1.1%) (1.3%) (1.1%) (1.1%) (1.4%) (0.3%) (1.9%) (2.0%) (0.8%) (1.1%) (2.8%) (2.0%) (1.5%) (1.8%) (3.7%) (2.4%) (2.3%) (2.5%) (2.5%) (2.7%) (4.3%) (3.2%) (3.0%) (3.0%) (3.0%) (3.1%) (4.0%) (3.5%) (3.5%) (3.4%) (3.3%) (3.4%) (3.3%) (3.9%) (3.9%) (4.0%) (4.7%) (6.0%) (5.0%) (6.4%) (8.0%) 3/2016 5/2016 7/2016 2/2017 4/2017 6/2017 9/2017 1/2018 2/2016 4/2016 6/2016 8/2016 9/2016 1/2017 3/2017 5/2017 7/2017 8/2017 2/2018 10/2016 12/2016 11/2017 11/2016 10/2017 12/2017 Page 3 Source: Nation’s Restaurant News, TDn2K’s Black Box Intelligence report. Duff & Phelps Restaurant MonthlyCapital MarketsUpdate Industry | March Insights | 2018Q1 2016 Quarterly Same-Store Sales Performance – Last 2 Years 2015 2016 2017 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Mass Casual Cracker Barrel Old Country Store, Inc. 0.6% 2.3% 3.2% 1.3% 0.1% (1.2%) (1.4%) 0.2% 1.0% Brinker International, Inc. Chili’s Grill & Bar (2.1%) (3.6%) (1.8%) (1.4%) (1.4%) (3.3%) (2.3%) (2.2%) (3.4%) Maggiano’s Little Italy (1.8%) (1.8%) 0.2% (1.7%) (0.6%) (0.8%) (1.6%) 0.5% (2.6%) Bloomin’ Brands, Inc. Bonefish Grill (6.1%) (5.4%) (2.7%) 0.9% 1.7% (1.9%) (0.8%) (2.6%) (4.3%) Carrabba’s Italian Grill (2.0%) (4.0%) (2.0%) (4.8%) (2.1%) (2.3%) (3.8%) 0.4% (2.8%) Fleming’s Prime Steakhouse & Wine Bar (0.6%) (0.3%) 1.3% (0.8%) (1.9%) 0.2% (2.9%) (1.3%) (1.0%) Outback Steakhouse 0.1% (2.2%) (1.3%) (2.5%) (0.7%) (4.8%) 1.4% 0.3% 0.6% DineEquity, Inc. Applebee’s (2.5%) (3.7%) (4.2%) (5.2%) (7.2%) (7.9%) (6.2%) (7.7%) 1.3% IHOP 1.4% 1.5% 0.2% (0.1%) (2.1%) (1.7%) (2.6%) (3.2%) (0.4%) Denny’s Corporation 2.9% 2.5% (0.5%) 1.0% 0.6% (1.1%) 2.6% 0.9% 2.5% Red Robin Gourmet Burgers, Inc. 3.7% (1.6%) (2.2%) (3.2%) (3.6%) (4.3%) (1.2%) 0.5% (0.1%) Biglari Holdings, Inc. 3.6% 1.8% (0.7%) 0.2% 0.4% (3.3%) (3.1%) (2.2%) (2.2%) Luby’s, Inc. 1.2% 3.1% (0.6%) 0.7% (2.3%) (3.8%) (2.7%) (5.1%) 0.8% Famous Dave’s of America, Inc. (10.6%) (7.7%) (6.4%) (1.0%) (5.4%) (4.5%) (3.0%) (1.5%) 1.8% Median (0.3%) (1.7%) (1.0%) (0.9%) (1.7%) (2.8%) (2.5%) (1.4%) (0.3%) Mean (0.9%) (1.4%) (1.3%) (1.2%) (1.8%) (2.9%) (2.0%) (1.6%) (0.6%) Source: SEC filings, S&P Global Market Intelligence, Mergermarket, company press releases and various news sources (e.g., New York Times DealBook, The Deal, The Wall Street Journal, etc.). SSS represents the change in year-over-year sales for restaurants that have been open for at least 18 months. Page 4 Represents most actively traded public restaurant companies. Duff & Phelps Restaurant MonthlyCapital MarketsUpdate Industry | March Insights | 2018Q1 2016 Quarterly Same-Store Sales Performance – Last 2 Years 2015 2016 2017 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Specialty Casual Darden Restaurants, Inc. Bahama Breeze 2.4% 9.9% 5.4% 3.9% 2.6% 0.5% 1.4% 1.2% 2.5% The Capital Grille 1.5% 5.3% 1.5% (1.2%) 1.2% 0.9% 1.4% 2.0% 3.8% Eddie V’s 1.1% 4.1% 0.9% (1.7%) 2.7% 4.7% 0.5% 2.5% 6.8% LongHorn Steakhouse 2.6% 5.2% 1.1% 0.6% 0.1% 0.2% 3.5% 2.6% 3.8% Olive Garden 1.0% 6.8% 1.6% 2.0% 2.6% 1.4% 4.4% 1.9% 3.0% Seasons 52 4.5% 5.7% 3.7% 0.7% (0.3%) 0.8% (1.3%) (2.2%) (0.5%) Yard House 1.7% 3.9% 1.4% 0.0% 0.7% (1.0%) 0.1% (0.4%) 2.0% Texas Roadhouse, Inc. 4.4% 4.3% 4.5% 3.4% 1.1% 3.2% 3.9% 4.5% 5.4% Dave & Buster’s Entertainment, Inc. 6.0% 3.6% 1.0% 5.9% 5.9% 3.2% 2.2% 1.1% (1.3%) BJ’s Restaurants, Inc. 0.7% 0.6% (0.2%) (3.4%) (3.4%) (2.2%) (1.3%) (1.4%) (1.7%) Chuy’s Holdings, Inc. 3.2% 3.2% 1.0% 0.3% 0.3% (1.1%) (0.7%) (1.0%) (2.1%) Median 2.1% 4.2% 1.3% 0.5% 0.9% 0.7% 1.0% 1.2% 2.3% Mean 2.5% 4.2% 1.6% 0.7% 1.0% 0.6% 1.2% 0.8% 1.6% Source: SEC filings, S&P Global Market Intelligence, Mergermarket, company press releases and various news sources (e.g., New York Times DealBook, The Deal, The Wall Street Journal, etc.). Same-store sales represents the change in year-over-year sales for restaurants that have been open for at least 18 months. Page 5 Represents most actively traded public restaurant companies. Duff & Phelps Restaurant MonthlyCapital MarketsUpdate Industry | March Insights | 2018Q1 2016 Quarterly Same-Store Sales Performance – Last 2 Years 2015 2016 2017 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Polished Casual The Cheesecake Factory Incorporated 1.1% 1.7% 0.3% 1.7% 1.8% 1.0% 0.1% (0.6%) (2.4%) J. Alexander’s Holdings, Inc. J. Alexander’s/Redlands Grill 1.4% (3.0%) (1.8%) 1.4% 1.5% 1.1% 2.9% 4.0% 1.8% Stoney River Steakhouse and Grill 6.2% 0.7% 1.8% 1.8% (1.7%) 0.4% 0.5% 3.7% 2.0% Kona Grill, Inc. 3.2% 3.6% 2.5% 0.7% 0.7% (4.1%) (4.3%) (5.3%) (7.2%) Median 1.3% (0.7%) (0.8%) 1.1% (0.5%) (1.9%) (0.9%) (0.8%) (2.6%) Mean 0.4% (0.5%) (2.0%) (0.8%) (1.6%) (2.2%) (0.9%) 0.1% (2.7%) Fine Dining Ruth’s Hospitality Group, Inc.
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