Restaurant Traffic Continued To Fall In October

Recent earnings reports from Red Robin Gourmet Burgers (RRGB) and DineEquity (DIN), parent of IHOP and Applebee’s, showed continued same-store sales declines, which in our view reflects our cash-strapped consumer investing theme. As these rear-view mirror results continue to come in, we’re focusing on more recent data that point to some improvement, but while some may put a rosy spin on the data, we’re still seeing negative traffic and a high use of promotional activity.

While we continue to see cash-strapped consumers favoring eating at home, and likely embracing Costco’s (COST) grocery offerings to stretch spending dollars, we’ll continue to look for publicly traded restaurants that are looking to leverage consumers’ preference for organic and natural diets that are a part of our food with integrity investing theme.

After disappointing sales in the third quarter, the restaurant industry was desperate for good news. October delivered, with same-store sales turning positive for the first time since May 2016.The 0.9-percent same-store sales growth last month was the industry’s best result in more than two years, according to TDn2K data through The Restaurant Industry Snapshot, based on weekly sales from 30,000 restaurant units, more than 155 brands and representing over $68 billion in annual revenue.

Same-store traffic declined 1.5 percent, continued evidence that falling guest counts remain the biggest challenge for restaurant chains since the recession. However, October’s traffic results represented the strongest month since February 2016, and have significantly improved over the average 3.6-percent decline in the first three quarters of the year.