Casual dining sites see empty seats

Got a hankering for an Outback steak but the budget for a Big Mac?

Apparently, many folks feel that way, as the slowing economy dulls the nation’s appetite for casual dining. For the first time in years, the $70 billion casual dining industry — sit-down eateries that generally serve alcohol and sell entrees from $10 to $20 — is taking a hit.

Some of the big names — from Applebee’s to Cheesecake Factory to Outback Steakhouse — report recent slides in sales at stores open at least one year. Many of their stocks are hovering at 52-week lows.

Some folks are eating out less. Others are trading down to fast food. Some are skipping dessert or ordering less wine. The result is that casual dining’s growth is slowing, and no longer outpacing the industry.

In June, Red Lobster’s same-store sales were down 5%, Ruby Tuesday was down 2.3%, and P.F. Chang’s was down 1.1%. In May, the last month reported, Applebee’s was down 1.9%, and Outback was down 2.6%.

Meanwhile, Cheesecake Factory reported a 1.3% same-store sales decline in the first quarter and has warned the second quarter will be flat to slightly negative. The chain has never had two negative quarters in a row, says Michael Dixon, chief financial officer.

To boost business, Cheesecake Factory added a page to its lunch menu of some of its most popular dinner entrees in a smaller size at a lower price.

„In the 12 years I’ve covered this industry, I don’t recall a downturn of this magnitude,“ says Lynne Collier, restaurant analyst at Stephens Inc. Nine of the 10 casual chains she follows have seen traffic decline in the past three months, she says.

Not all casual dining chains are feeling the pinch. Olive Garden and California Pizza Kitchen have seen comparable-store sales track up in recent months. But as a whole, the casual dining industry is struggling. „We’re going through a little indigestion here,“ says Peter Oakes, restaurant analyst at Piper Jaffray. „The days of build it and they will come may be over.“

Driving the downturn:

•Rising gas costs. A home with two SUVs in the driveway needs an extra $1,500 per year to pay for costlier gas, Oakes says. „And the consumer is thinking the price hikes aren’t temporary this time.“

•Better downscale choices. Upgraded options at fast foodies such as McDonald’s and fast-casual spots such as Panera Bread are attracting penny-pinchers, says Ron Paul, president of research firm Technomic. McDonald’s on Monday reported second-quarter same-store sales up 4.2%.

•Higher credit card costs. Most major credit card issuers raised minimum payments last year, so many consumers have less „fun“ money, Collier says.

•Weaker real estate market. As housing prices weaken, some folks „feel“ less wealthy, Oakes says.

Source: USAtoday.com

Örn Garðarsson