Restaurants are still suffering

A new report shows that traffic to restaurants is still dropping, though not as fast as in 2009.

By Kim Peterson Sep 16, 2010 3:54PM
Cheap dining © CorbisBad news for restaurant stocks: Visits to U.S. restaurants has now dropped for eight consecutive quarters.

Market research company NPD found that restaurant visits were down by 1% in the spring quarter. But there is a bright side: A year earlier, traffic was down 3%. So at least the losses seem to be slowing.

Fine dining restaurants, including those at upscale hotels, continued to be hammered after seeing devastating losses last year. Traffic was down 3% in that category, which isn't all that surprising considering the drop in business travel as well as the new era of penny-pinching in America.

But "midscale" restaurants also saw a 3% decline. This category includes breakfast-oriented establishments like IHOP and Denny's (DENN).

The "casual dining" group, which includes Applebee's and Olive Garden, saw a 2% drop in the quarter.

The only bright spot was fast-food restaurants like McDonald's (MCD), which had finally stabilized after five straight quarters of declines, NPD said.

Fast food also saw a revival of breakfast. The morning meal was the one area of traffic growth, NPD said, with breakfast visits up 1% at all restaurants and 2% just at fast-food restaurants. It's curious, though, that breakfast business seems to be heading to fast food and not to Denny's and IHOP. Lunch and dinner were still weak categories for all restaurants.

Another area that became more popular in the quarter was the value menu, NPD said. Again, not surprising.

NPD said it expects traffic to stabilize for this industry in the third quarter and then begin to recover in the fourth quarter.


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