Redbook Retail Sales Index for Restaurant Investors

Key Restaurant Indicators Investors Must Know

(Continued from Prior Part)

The Johnson Redbook index

A major indicator for retail sales, the Johnson Redbook retail sales index declined to 1.8% in the third week of May from 2.1% in the previous week. Plus, it declined from 3.9% in the corresponding week in 2014.

Retail sales were softer between Easter and Memorial Day, or April 5–May 25, 2015. Looking ahead to the end of the month, May’s retail numbers should be positively impacted by the Memorial Day sales.

Interpretation

The Johnson Redbook index tracks consumer spending and is reported on a weekly basis. The index is made up of sales data from discounters, chain stores, and department stores. The ICSC–Goldman index also reports consumer spending data on a weekly basis and is considered a more accurate indicator than the Johnson Redbook index.

An increase in the Johnson Redbook index also gives a general view of improving consumer sentiment. Although it does not include restaurant sales, investors can look at this indicator and get a sense of where the economy is headed from the retail sales perspective. This would benefit investors in the Consumer Discretionary SPDR ETF (XLY), which holds restaurant stocks such as 0.3% of Darden Restaurants (DRI), 1% of Chipotle Mexican Grill (CMG), 1.5% of Yum! Brands (YUM), and 3% of Starbucks (SBUX).

The US Initial Jobless Claims report is a good indicator to understand retail sales, as it reflects the health of the country’s employment picture. We will discuss this in more detail in the next article.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Key Restaurant Indicators Investors Must Know

• Part 2 - How Restaurant Investors Can Benefit from the ICSC–Goldman Index

• Part 4 - Restaurant Investors Can Cheer the May 16 Jobless Claims Report