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Earlier this year, an analyst warned of a looming restaurant recession that could translate into a widespread recession in the US by next year.
Stifel Nicolaus & Co analyst Paul Westra downgraded 11 restaurant stocks that had a gloomy forecast, and recent restaurant performance is supporting his projections. As of September, restaurant traffic was down 2.8% compared to the start of the year for the 25,000-plus restaurants surveyed by research firm TDn2K in a recent report. If traffic and sales continue at this pace, 2016 will have the weakest annual performance of the industry since 2009, the firm reports.
Why the decline in traffic? Gas prices continue to decline and food costs at grocers are down—both usually boost discretionary spending and restaurant visits, the Wall Street Journal reports. The No. 1 reason is related to worsening personal finances and increased healthcare costs in particular, a Civic Science report reveals. Within the past year, as health insurance costs rose, the firm says 45% of consumers cut back on restaurant spending. [WSJ]
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