Sector Snap: Restaurants

NEW YORK (AP) — A Stifel Nicolaus analyst said Friday that the casual dining sector is still too overcrowded and estimated that as many as 12,000 locations may need to close for the supply of restaurants to match consumer demand.

"After years of too much growth in casual dining, compounded since 2006 due to a weak consumer, the supply and demand of units is extremely out of equilibrium, and will take years to correct," said analyst Steve West in a note to investors.

Early this decade, credit was easy to come by and many restaurant companies — particularly in the highly competitive bar-and-grill segment — took advantage of that by financing ambitious expansion programs. The growth of casual dining locations, West noted, has now outpaced that of the U.S. population.

And now that fewer consumers are eating out, there are fewer customers to go around.

West estimated that about 7,500 bar-and-grill locations will need to close. That's about four times the size of the total number of Applebee's restaurants, he noted.