Restaurant Stocks Beat The Rest of the Dow

As I noted in a blog post earlier this year, restaurants, especially high end ones, get hit hard in a recession.  Eating out is a luxury, not a necessity, to most people, and it therefore becomes one of the first to go when people start watching their pocketbooks.  Luckily, when those same pocketbooks start seeing the light of day again, restaurants are also one of the first businesses to see them.

This phenomenon seems to be occurring this month, and hopefully it’s not just a blip in an otherwise bleak economy.  Consumer confidence is up for the third month in a row and is now higher than it’s been for some time.  Of course, it’s still lower than peaks seen in 2006 and 2007.

With that rising confidence has come a jump in the Nation’s Restaurant News index of top restaurant stocks, which saw a healthy 3 month climb that culminated this week in a great performance that beat the rest of the Dow.  Once again, these stocks are still down from last year and have seen no gain overall yet this year, but the steady gains made since February lows are certainly encouraging.

The higher consumer confidence is, the more likely consumers are to spend, and the food service industry is usually one of the first places to enjoy increased consumer spending.  Restaurateurs can only hope the worst days are behind them and look forward to a decent summer.