Friday, July 23, 2010

Not yet or Nyet for the economy



The Nation's Restaurant News posted a gloomy impression of the outlook for casual restaurant chains, considered by some to be a bellwether of consumer confidence. It reported that Ruby Tuesday, The Cheesecake Factory, and BJ’s Restaurants each said same-store sales increased for their latest quarters.

However, the NRN's expert said, "We continue to believe a rapid consumer ‘rebound’ is unlikely, and even if the consumer strengthens more quickly than we expect, we do not believe they are likely to immediately trade back up to casual dining. We believe the high-water mark for customer traffic will take years to recapture, if it is even possible, unless the supply of units in the marketplace has a much more substantial correction than we are currently seeing." This dark cloud provided to you by Steve West at Stifel, Nicolaus & Co.

In their view, these restaurant captured customers from other restaurants, but did not add business to the total pool. What Mr. West means by a substantial correction in the supply of units in the marketplace is a lot of restaurants closing and a lot of folks losing their jobs. Ugly.

Read the whole article here.

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