Yahoo Finance How the Food Retail Trade Is a Key to Restaurant Stocks
Why the Federal Funds Rate Matters to Restaurant Investors
Retail trade
Retail trade data for food and drinking places, as well as grocery stores, is issued by the Census Bureau. The Census Bureau’s retail trade data partially comprises information from the food services and drinking places subsector, which includes restaurants.
Grocery store sales also make up a part of this retail trade data. Information from these areas is more relevant for investors focusing on the food industry.
The food and drinking place retail trade was at its peak in January 2015 at 11.7%. This is also when the consumer confidence was at its peak, as we saw in the previous part of this series. Food and drinking place retail trade data has closely trended with consumer confidence. So, consumer confidence and retail trade data are important indicators to follow.
With the consumer sentiment dipping in August, the food and drinking place retail trade, which came in at 6.1% also dropped as you can see in the chart above. Weak consumer outlook in the US economy was reflected in the food and drinking place retail trade as well. What happens when consumers do not eat out as much? They buy groceries and prepare their meals at home.
In the chart above, you can see that the grocery store retail trade data seems to follow an opposite trend of food and drinking place retail trade data. The most recent grocery retail sales in August trended upward while the food and drinking place sales fell.
Restaurant stocks take a beating
Since August 1, 2015, stocks such as Shake Shack (SHAK), Panera Bread (PNRA), Yum! Brands (YUM), and Darden (DRI) have taken a beating. It should not come as a surprise that Consumer Discretionary Select Sector SPDR (XLY) has lost 6% since August, confirming the anticipated weakness in the economy.
In the next part, we will discuss the key revenue driver that is impacted by all the indicators we discussed in this series.
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