6 Restaurant Stocks To Thrive & Reverse Industry Trends In 2H

“If anything is good for pounding humility into you permanently, it's the restaurant business.” — Anthony Bourdain.

In the first half of 2018, the U.S. restaurant industry numbers have exhibited deviation from its long standing negative trend. After recording its highest growth in comps during April, the industry witnessed flat comps during May. Further, in June, restaurant comps inched up 1.1%. This highlights the underlying anomaly surrounding the otherwise flourishing industry.

Glimpse of Restaurant Performance in the First Half

After surviving the seven-quarter jinx of declining comps, the U.S. restaurant industry was pleasantly surprised in the fourth quarter of 2017. Per TDn2K’s The Restaurant Industry Snapshot, comps in the fourth quarter were up 0.4%, comparing favorably with the third-quarter’s comps slip of 1%.

For the first quarter of 2018, comps rose a meager 0.1%, making the mood somber. However, in the second quarter, comps again inched up 0.8%, highlighting the restaurant industry’s positive comps with slow-but-steady growth in three successive quarters. Moreover, the same industry witnessed encouraging sales in the last six of the past nine months. In the first half of 2018, overall sales in the industry nudged up 0.5% compared with a 1.2% fall in sales during the first half of 2017.

Growth in comps throughout the first half of 2018 can be attributed to the rise in consumer demand and discretionary spending. This is evident from the guest check’s growth in recent quarters. For the first six months of 2018, average check increased 2.9%, up from the 2.2% rise in the comparable period last year.

Notably, in the first half of 2018, casual dining and fast casual reported the most improvement, reflecting a shift in consumer taste and preferences. Most gains in the industry were derived from to-go and delivery sales. Despite price rises from higher input costs, a large portion of the positive change in average check is attributable to casual dining segment, which is increasingly relying on delivery and other technological advancements to connect with customers.

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