Whenever I walk into a crowded restaurant with my mother, she remarks, "This place is a gold mine." Mom doesn't frequent the publicly held restaurant chains like P.F. Chang's ( PFCB) or the Cheesecake Factory ( CAKE). But if she did, she certainly wouldn't be uttering that phrase. The casual-dining restaurant chains' earnings reports this week stunk about as badly as a week-old asparagus and mushroom quesadilla with extra sour cream. The main culprit? Traffic. People just aren't showing up anymore. Cheesecake Factory saw first-quarter traffic decline by roughly 1%, the company reported Tuesday. At Brinker ( EAT), whose chains include Chili's and Romano's Macaroni Grill, traffic was down more than 5% in the quarter. IHOP ( IHP) also recorded traffic declines. Many companies, as they are apt to do, blamed the lack of customers on the weather. While weather can hurt sales, especially if there are nasty storms, you rarely hear a company credit sunny comfortable days for an increase in sales. It hasn't rained in about six months where I live in South Florida, yet I don't recall any CEOs discussing abnormal strength in that market. Rising gasoline prices certainly haven't helped the restaurants' cause. However, you can't pin their woes simply on bad weather and expensive gas. After all, retail chains, which face the same headwinds, have been
performing quite well lately.