by Calculated Risk on 2/13/2009 08:53:00 AM

From Jerry Hirsch at the LA Times: Cost-conscious customers wreaking havoc on ailing restaurants

From the corner diner to elegant Westside eateries, restaurants in Southern California are shrinking portions, slashing wine prices, cutting employee hours and reducing staff. Some chain restaurants and fast-food purveyors are shutting unprofitable branches, and experts say some may not survive.

Many large dinner-house chains are reporting some of the largest drops in same-store sales -- an important measure of a retailer's financial health -- in recent history.

After the stock market closed Thursday, Southern California chains Cheesecake Factory Inc. and California Pizza Kitchen Inc. both reported plunging same-store sales and profits.

"It is a very tough environment out there," said Richard Rosenfield, co-chief executive of CPK
...
Cheesecake Factory said ... Same-store sales decreased 7.1% ... CPK said ... Same-store sales slid 7.2%.

Dining out is a discretionary expense, and it no suprise that many restaurants are getting hit hard. We can see this in the Restaurant Performance Index from the National Restaurant Association (NRA). Low end chains however might do OK as consumers move to inferior goods; McDonald's same-store sales rose 7.1% in January!

The WSJ has an article too: Consumers Cut Food Spending Sharply

Consumers have cut back sharply on food spending, shunning restaurants, opting for generic products over brand names, trading in lattes for home-brewed coffee and shopping for bargains. That is hurting sales and profits at many food processors, grocery chains and restaurants.
...
In 2008's fourth quarter, consumer spending on food fell at an inflation-adjusted 3.7% from the third quarter, according to data from the Commerce Department's Bureau of Economic Analysis. That is the steepest decline in the 62 years the government has compiled the figure.

More cliff diving.