According to benchmarking data from MillerPulse, restaurant same-store sales increased 0.5% in June. Although the bump is small, it's not trivial as June marked the second consecutive month of increasing same-store sales. After experiencing negative comps for 10 straight months, the hint of a turnaround is welcome news for the restaurant industry.
Strong start to earnings season
MillerPulse's data is also being reflected in the latest earnings from publicly traded restaurants. Earlier this week, both Domino's Pizza (NYSE:DPZ) and McDonald's (NYSE:MCD) reported strong second quarter results.
Systemwide sales at McDonald's increased an impressive 8% during the quarter. Even more impressive is global comparable sales increased 6.6%, while domestic same-store sales grew 3.9% over the prior year. Initiatives such as All Day Breakfast and Signature Crafted premium sandwiches are proving to be a boon for McDonald's franchisees.
Meanwhile Domino's Pizza continued its hot streak with its 25th consecutive quarter of positive, domestic same-store sales. The pizza chain was able to grow U.S. comps 9.5% while also increasing its store base by 217 (of which 39 were domestic). Earnings per share were up 34% year over year, a remarkable feat given the company's size. As of June 2017, there were 14,217 company-owned and franchised Domino's across the globe.
Domino's and McDonald's results are more recent, but there were early signs of encouragement that the industry was in the beginning of a comeback. On June 27, Darden Restaurants (NYSE:DRI) was the first of the major chains to announce results. Same-store sales for the fiscal fourth quarter increased 3.3%, while its largest revenue contributor -- Olive Garden -- grew 4.4%. Of the seven brands open at least one year under Darden's umbrella, six showed positive comps.
Looking ahead, investors will have plenty more earnings reports in the coming days to watch as they decide for themselves whether the recovery is real or limited to a few companies.
On the right track, but numbers aren't quite whetting the appetite
Although the positive industry data from MillerPulse is promising, there are still concerns for investors. Same-store sales may have grown two consecutive months, but foot traffic is still declining.
June marked the 16th consecutive quarter of year-over-year traffic declines. Positive same-store sales and down foot traffic indicate that consumers are spending more when visiting restaurants. The recent positive comps may also be a result of easier comparisons. Same-store sales peaked in Jan. 2015 at 5.3%, according to Nation's Restaurant News. After that, growth decelerated and turned negative in June last year. Fast forward 12 months, and the industry had a much easier bar to climb.
Nonetheless, seeing the industry stabilize is an encouraging sign. Markets are also optimistic. The NRN Restaurant Index of 40 publicly traded eateries has increased about 15% year to date, outpacing the S&P 500 over the same period. If the trend continues, restaurants should be able to post encouraging sales numbers as the industry pulls itself out of a year-long slump.
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