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Delayed Restaurant Recovery Will Boost Retailers’ Sales

Delayed Restaurant Recovery Will Boost Retailers’ Sales

Food retailers were again the beneficiary of restaurant industry woes in June and are likely to see a similar boost in July as a flare up of COVID-19 has hindered operators’ efforts to fully re-open.

Customer transactions at major U.S. restaurant chains fell 13% in the week ending June 21 versus the same week a year ago, which is slightly softer than the 12% decline in the previous week, according to The NPD Group. The decline is a setback for the restaurant industry and marks the first time since the week ending April 12 that there has not been an improvement in the year-over-year trend, according to NPD.

The numbers are noteworthy and suggest food retailers were the likely beneficiary of the displaced demand, as was the case in March and April when restaurants were closed or severely restricted and Americans were forced to rediscover home cooking.

David Portalatin, NPD’s top food industry advisor
David Portalatin, NPD’s top food industry advisor

"The U.S. restaurant industry's road to recovery is going to have some bumps along the way," according to David Portalatin, NPD’s top food industry advisor. "The pandemic isn't over and, as often mentioned, is 'unprecedented' so there is no road map. The foodservice industry is solidly in the restart phase as restaurants begin to reopen on-premise operations, adopt and implement new procedures and protocols, and keep plans fluid because things could change quickly."    

As for the decline in June, a couple factors were in play and contributed to the restaurant industry’s setback. COVID-19 case surges in a number of states contributed to the back track in decline improvements, but NPD also noted that the period measured included Father's Day, which unlike Mother's Day, is more of a backyard BBQ occasion than a restaurant dining event.

With new COVID-19 cases suddenly surging across multiple states, some of the states that have been reporting the highest number of new cases experienced steeper declines in major restaurant chain customer transactions in week ending June 21. Arizona, with a well-publicized surge in cases, saw a five point decline in year-over-year transactions in the week, according to NPD's CREST Performance Alerts service which provides a rapid weekly view of chain-specific transactions and share trends for 72 quick service, fast casual, midscale, and casual dining chains.

In addition, restaurant transactions in Florida, Nevada, and North Carolina, all of which reported spikes in COVID cases, declined 2-points, 4-points, and -5-points respectively. Customer transactions in California and Texas, both of which have a large number of restaurants, were flat compared to prior week.

Despite the setback for the industry, major full service restaurant chains did benefit from an increase in the number of localities and states that now permit on-premise dining. The percentage of restaurant units that are allowed to reopen dine-in operations increased to 79% in week ending June 21 versus 74% in the prior week. The full service restaurant segment declined 24% in the week compared to year ago versus a 26% decline week prior. Customer transactions at quick service restaurants declined by 12% in week ending June 21 versus year ago compared to an 11% decline in week ending June 14.

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