NEW YORK – A relentless news cycle of economic ups-and-downs is giving indigestion to would-be diners at U.S. steakhouses.
Revenue at these restaurants has been more erratic in 2012 than last year as eating out has become an emotional decision, even for affluent consumers and corporate customers, said Malcolm Knapp, a New York-based consultant who created the Knapp-Track Index of monthly restaurant sales and guest counts. It’s a very uneven market.
There could be additional weakness ahead in the fourth quarter as news about the economy dominates headlines leading up to the November presidential election. Waves of fear about the health of the U.S. expansion have taken a toll on corporate spending, a key component of steakhouse sales, and further fears could have a pretty sizable impact on this industry, said Mike Englund, chief economist at Boulder, Colo.-based forecaster Action Economics.
It’s easy to go to a fancy restaurant if you’re spending somebody else’s money, but if your expense account is cut by 20 percent, you’ll go somewhere that costs less, Englund said, adding that expense accounts are one of the first expenditures business owners will target if they become more cautious about the economic outlook.
This year definitely has been more bumpy for the more than 100 fine-dining establishments owned by Landry’s, which took Morton’s Restaurant Group private in February and also owns Vic & Anthony’s and Brenner’s steakhouses. While same-store sales are positive, they’re not near the growth of last year, Chief Executive Officer Tilman Fertitta said without detailing 2011 performance.
A pervasive news cycle is largely to blame, as would-be diners have been influenced by external events including Europe’s sovereign-debt crisis and risks associated with the looming U.S. fiscal cliff, said Knapp, who has monitored the industry since 1970 and frequently speaks with steakhouse operators. As a result, sales lack a true rhythm.
Same-restaurant results at The Capital Grille, owned by Darden Restaurants, grew 2.8 percent in the three months ended May 27 – the chain’s slowest pace since 2010.