Open Restaurants, Return to Work Leave Grocery Stocks in Limbo

(Bloomberg) -- With restaurants resuming some dine-in services and more people returning to work, grocery stores are getting the short end of the stick.

The total grocery industry, which includes in-store shopping and delivery and meal-kit providers, saw an “across-the-board spending deceleration” of about 500 basis points for the two weeks that ended May 19 from the previous two weeks, according to M Science. Store-directed purchases, which exclude third-party delivery, dropped by about 300 basis points.

“Online/delivery services, which since the start of the pandemic has grown more than any other category, saw the largest deceleration, though we note deceleration is very modest relative to growth that remains above 250%” from a year earlier, said senior analyst Matthew Goodman, citing his firm’s analysis of third-party consumer spending data.

The data coincides with weekly improvements in restaurant sales throughout May. Since declines bottomed in the week that ended March 31, sales have accelerated sequentially, and by the week ended May 19, had improved by 25 percentage points from the bottom.

Let’s Go Out!

Consumers appear ready and willing to leave their dining room tables. Restaurant data examined by M Science show that the sales acceleration in states where dine-in restrictions have eased is entirely attributable to the non-delivery side of the business. The delivery share of sales has fallen across the firm’s restaurant coverage.

Meanwhile, a report From Black Box Intelligence paints a similar picture. The restaurant analytics firm said earlier this week that as many restaurants began reopening across the country last month, the industry was able to take back 4.3% share of food spend from grocery stores.

Investors may be buying into this trend reversal. Since May 1, an index of restaurant stocks has outperformed a group of food retailers, while between Feb. 20, when Covid-19 concerns began to impact U.S. markets, and the end of April, the food group rose 3.4% and the restaurants sank 15%.

©2020 Bloomberg L.P.