This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Restaurant Recovery: Not This Year, Not Next

Stocks in this article: DRI

By Christina Cheddar Berk, News Editor at

NEW YORK ( CNBC) -- Darden Restaurants (DRI) cut its fiscal 2012 earnings and sales forecast Tuesday, hurt as deep discounts at its Olive Garden chain failed to bring in new guests.

But Darden, which also operates Red Lobster and LongHorn Steakhouse, isn't the only restaurant suffering these days.

It's been a rough year all around for restaurant operators, with consumers eating out less often. Market researcher NPD Group said Tuesday it doesn't expects 2012 will be much better.

NPD issued its forecast for next year and said it expects the number of diners going to restaurants to be flat in the first half of 2012, but to end the year with visits up by 1%.

That's pretty much the opposite of what happened in 2011. This year, the industry started off hopeful after ending 2010 with two consecutive quarters of 1% traffic increases, but the vision did not materialize.

More from CNBC
Americans Reject Automatic Budget Cuts
Emerging Markets Still a Good Bet -- For the Long Term
Why Bank Stocks Are Stuck in a Crushing Bear Market

The first blow came from high food costs and gasoline prices, which drove up restaurant costs and drained consumer pocketbooks. Restaurant traffic struggled to stay positive, and posted a 0.2% gain in the quarter ending March, according to NPD.

Then, in the second and third quarters, restaurant traffic fell 0.4% during each period, according to NPD's CREST service, which continually tracks consumer use of U.S. restaurants.

NPD, which expects industry traffic will be flat for the rest of this year, blames the trend on high unemployment and low consumer confidence.

"Consumers held tight to their food service dollars this year. Even the deals that helped drive traffic over the past few years weren't as effective this year," said Bonnie Riggs, NPD restaurant industry analyst, in a press release.

Digging into the numbers a little deeper, it seems that quick-service and fast-food restaurants, which represent 78% of the industry's visits, helped buoy up the overall results with a 1% gain in the first quarter and flat traffic in the second and third quarters. Meanwhile, visits to midscale/family restaurants and casual dining restaurants declined in all three quarters.

One bright spot for restaurant operators, however, has been the check. Despite the weak traffic, consumer spending at restaurants was up 1.3% in the third quarter, 2% in the second quarter, and 1% in the first quarter, while the average per-person check rose 1% in the first quarter, and 2% in each of the last two quarters.

-- Written by Christina Cheddar Berk, News Editor at

CNBC is a world leader in business news, providing real-time financial market coverage and business information.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs