Chipotle cited tough wintry weather as a big factor in its Q1 2018 performance. / Bloomberg Chipotle cited tough wintry weather as a big factor in its Q1 2018 performance. / Bloomberg

Restaurant Chains Play Catch-Up After a Long Winter

It had been months since Adam Dubois, 30, went to Dollop Coffee in Chicago’s Loop. Instead, he’d stayed cooped up in the office, reluctant to venture out in the snow and frigid spring temperatures.

“It definitely decreased my willingness to travel more than a block,” he said while sipping an iced coffee on a bench outside with a co-worker. Temperatures in the city reached into the 70s and 80s this week after a bitterly cold April.

Warm weather may be here at last, but the restaurant industry is going to be feeling the effects of the long, harsh winter for months to come. First-quarter results already saw companies from Chipotle Mexican Grill Inc. to Darden Restaurants Inc. citing the cold’s impact, and April’s chill promises to extend the pain into second-quarter reports scheduled for release this summer.

“In the northeast, March and April were insane,” said Bloomberg Intelligence restaurant analyst Mike Halen. “The amount of precipitation that we’ve had and the temperatures we’ve had — it’s been a really rough few months.”

The average April temperature at Chicago’s O’Hare International Airport was 41.2 degrees Fahrenheit — or 7.7 degrees below normal — according to National Weather Service records. The month clocked in six days of measurable snow, one shy of the all-time mark of seven set in 1910. Temperatures were also lower than normal in New York, Boston and Philadelphia.

‘Exceptionally Cold’

“This is an exceptionally cold April,” said Ricky Castro, a National Weather Service meteorologist in Romeoville, Illinois.

McDonald’s Corp., Dunkin’ Brands Group Inc. and Darden all said the weather shaved off at least a half-percentage point from the closely watched metric of same-store sales. Chipotle, meanwhile, didn’t break down the cold’s impact on sales, but Chief Financial Officer Jack Hartung noted that “the weather definitely hit us.”

Across the industry, the trend would amount to millions of dollars of lost revenue in 2018, said Jennifer Bartashus, an analyst at Bloomberg Intelligence — another headwind for an industry that’s already crunched by rising labor costs and intensifying competition.

“There should be some spillover from the first quarter that impacted especially the early weeks of the second quarter,” Bartashus said.

Mother Nature Is Skipping Spring and Heading Right Into Summer

While the chill has hurt eat-in chains, it may have helped delivery services.

“The quick-service and fast-casual names got hurt more by weather,” said Maxim Group analyst Stephen Anderson. “The options that do more delivery, like the pizza chains, do better in this kind of weather. People don’t really go out — they want to have something delivered.”

Domino’s Pizza Inc. surged to a record high last week after the company’s first-quarter sales beat estimates by about $100 million. On a call with analysts, however, Chief Executive Officer Patrick Doyle downplayed the weather’s impact, saying “it just doesn’t play into our business that much.”

Forecasts show relative normalcy has returned, with temperatures expected to remain at more comfortable levels in May.

In Chicago, Dubois’s opinion of the month may reflect that of many restaurant companies: “April was the worst April I could remember,” he said.

–With assistance from Justina Vasquez and Kevin Varley .


©2018 Bloomberg L.P.


This article was written by Leslie Patton and Brian K. Sullivan from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].

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