The recovery of sales and employment at U.S. restaurants continued in August but at a pace slower than previous months.
August sales for the embattled industry fell about 15% from the year-ago period, leaving the U.S. restaurant industry on pace to lose $240 billion in sales by the end of the year, according to the National Restaurant Association. On a year-over-year basis, the decline in August sales was still another monthly improvement after the sector's sales fell a revised 19.4% year over year in July and 22.1% in June.
Shares of most of the biggest publicly traded restaurant companies rose in the month ended Sept. 15.
Sales
Sales for food services and drinking places declined 15.4% in August from the year-ago period to a seasonally adjusted $54.64 billion, according to U.S. Census Bureau advance monthly estimates released Sept. 16.
All retail sales grew 2.6% from the year-ago period in August to $537.53 billion, which was less than the 4.2% growth posted in August 2019.
Food services and drinking sales in August increased from the July figure.
Some sectors of the industry are faring better than others. Restaurant sales at limited-service restaurants were up 6.8% year over year in July while sales at full-service restaurants declined 37.5% year over year in July, Jake Bartlett, a Truist Securities analyst, said in a Sept. 16 report.
"After the initial sales bounce that followed the government-mandated lockdowns during the early weeks of the coronavirus outbreak, consumer spending in restaurants slowed during the peak summer months," the National Restaurant Association said in a Sept. 16 report.
In the months ahead and likely into 2021, the U.S. restaurant industry's recovery will continue to look more like a sluggish climb instead of the rebound to pre-COVID sales levels many are hoping for, according to a Sept. 9 Black Box Intelligence report. The number of seated diners in the U.S. was down 51% on Sept. 15 on a year-over-year basis, the restaurant reservation platform OpenTable reported.
Sysco Corp., a restaurant supplier, recently reiterated that the chief indicator of the pace of recovery is the easing of restrictions, with restaurants experiencing a near-immediate increase in business when restrictions are lifted, Credit Suisse analyst Lauren Silberman said in a Sept. 11 report. Earlier in September, New York's governor Andrew Cuomo announced that indoor dining in New York City can resume on Sept. 30 with a 25% occupancy limit, required temperature checks for customers and no bar service.
Going to places that offer on-site eating and drinking was associated with COVID-19 positivity, according to a U.S. Centers for Disease Control and Prevention study published Sept. 11. The National Restaurant Association called the study flawed.
Jobs
Food services and drinking places added 133,600 jobs in August, representing a steep decline from July, when the industry added 525,300 jobs. Food services and drinking places jobs totaled 9.8 million in August, an 18.7% decline from a year ago.
Restaurant employment gains in July and August have only been enough to put a "modest dent" in the job losses the industry experienced because of the pandemic, the National Restaurant Association said in a Sept. 4 report. The slowdown in hiring comes after the industry went through an unprecedented hiring surge in May and June when states were reopening their economies.
"As a result of the recent slowdown, eating and drinking place employment remains nearly 2.5 million jobs below its pre-coronavirus peak," the trade group said.
The outlook for future hiring is mixed as restaurant operators face uneven customer traffic, a challenging economy and the end of the outdoor dining season for parts of the country. The potential rising COVID-19 case levels could also renew dining restrictions, the National Restaurant Association said.
"The current trendlines suggest that if business conditions do not improve, the restaurant industry's employment recovery is in danger of stalling," the trade group said.
Share prices
Eleven of the 15 largest publicly traded U.S. restaurants posted stock gains in the month ended Sept. 15, according to S&P Global Market Intelligence. More broadly, the S&P Composite 1500 Restaurants subindex rose 7.7% and the S&P Composite 1500 index inched up 0.5%.
Shares of Shake Shack Inc. rose 32.4% in the month ended Sept. 15, the biggest gain and swing for the period. Shares of Wingstop Inc. fell 16.5% in the month ended Sept. 15.
Vulnerability
The chances publicly traded restaurants could default appear to have tempered somewhat in recent months.
A Sept. 15 analysis of the one-year probability of default scores identified 15 U.S. public restaurants with scores ranging from 22.4% to 8.4%, and corresponding implied credit scores of "ccc" to "b-," according to Market Intelligence data. By comparison, a similar analysis done on July 16 showed a range of 41.2% to 5.7%.
Potbelly Corp. had a 22.4% chance it could default in the next 12 months. Brinker International Inc. had a 16.4% chance it could default in the next year. Noodles & Co. had a 16.2% chance it could default. These companies did not respond to requests for comment.