Restaurant Indicator: Redbook Retail Sales Index Declines

Restaurant Indicators: Cautious Days ahead for Investors

(Continued from Prior Part)

Johnson Redbook Index

The Johnson Redbook Index is another indicator of retail sales in the US. The Redbook index fell to 1.1% in the week ending June 21, 2015, down from 1.2% in the previous week. This index also declined from 3.3% in the corresponding week a year ago to 1.2% in June 2015. The anticipation of higher sales related to Father’s Day failed to lift this index. The Redbook sales index indicates weaker data year-over-year, which reinforces the data in the ICSC-Goldman index.

Interpretation

The Redbook index is meant to provide an advance indication of trends in retail sales. The depressed Redbook index is certainly a reason for restaurant investors to be concerned.

The Johnson Redbook Index tracks trends in retail sales on a weekly basis. The index is made up of sales data from retailers such as the Gap (GPS) and general merchandisers such as apparel stores, discounters, department stores, home improvement, et cetera. Similarly, the ICSC-Goldman Store Sales Index reports on consumer spending data on a weekly basis.

Although Redbook doesn’t include restaurant sales, investors can look at this indicator and get a sense of where the economy is headed from a retail sales perspective. This would benefit investors in the Consumer Discretionary Select Sector SPDR Fund (XLY), which invests 0.3% of its holdings in Darden Restaurants (DRI), 3% in Starbucks (SBUX), 4% in McDonald’s (MCD), and 1% in Chipotle Mexican Grill (CMG).

Next, we’ll comment on weekly gas prices and see how restaurants were affected.

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Browse this series on Market Realist:

• Part 1 - Key Restaurant Indicators That Good Investors Track

• Part 2 - Empire State Index Sends Restaurants the Wrong Message

• Part 3 - How Restaurant Investors Can Interpret Initial Jobless Claims