Restaurant Sales Are Falling, But Stocks Are Up. Why?

Restaurant business and finance
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A big question posed by Restaurant Finance Monitor here in August: Why are restaurant stocks up, but restaurant sales are down?

Trying to analyze the underlying cause of something like this can be difficult, but the Restaurant Finance Monitor offers up an intriguing one. In essence,the argument is that store traffic is falling because many lower-to-middle class consumers aren’t visiting restaurants with the same frequency, an argument that makes sense to anyone who has hesitated before plunking down $10 for a meal in the recent past. In essence, as the RFM argues, restaurants are fighting over a smaller customer base.

The problem is that Wall Street simply isn’t considering that. Analysts with the major stock market don’t take that into account, because they’re only see the biggest of big pictures. The economy is improving and some restaurants are expanding, therefore restaurants are doing well. Many are, but there’s many more who are just getting by, even now.

So there’s a disconnect between stock prices and actual restaurant performance that is very real. The hope is that the majority of restaurants will continue their slow growth, that customers will return as the economy improves and the total performance of the industry will catch up with Wall Street’s rosy outlook. Let’s hope it happens soon.

For those restaurants seeking a way to mitigate a slow period, remember that financing can protect you from cash flow issues. You can find more details here.

Direct Capital is a leading provider of restaurant financing.