Foodservice Equipment Reports

Will Strong 2Q E&S Sales Lead To 2013 FER Forecast Revision?

As we reported two weeks ago in FER Fortnightly, sales of equipment and supplies surged in the second quarter of this year, catching us very much by surprise. The MAFSI Barometer, a reflection of manufacturers’ rep sales trends, jumped 6.1%, a record quarterly gain for the 11-year-old index. Combined revenues at the seven publicly reporting E&S companies we follow rose 4.1%. The changes are for the second quarter vs. the same quarter in 2012.

Given that our current forecast for nominal E&S sales growth at the manufacturers’ level is 3.3% (3.2% for equipment, 3.9% for supplies and tabletop), one may well ask if we’ll be revising the forecast upward. We’re sorry to say, not yet.

The first quarter was one of the softest for E&S sales since the beginning of the recovery. The MAFSI Barometer rose only 2.4%, the slowest growth since the index went positive 4Q/2010. Sales of the seven publics were up a mere 1.8% in the first quarter.

But there are more reasons to be conservative for now. Operator sales and traffic trends softened late spring and over the summer. And the latest numbers from the larger economy are not very favorable to foodservice sales growth. As we report elsewhere in this issue, consumer confidence took a strong dip mid-month, reading the Thomson Reuters/University of Michigan survey on consumer sentiment. Operator optimism also has waned somewhat. Consumers are worried that interest rates, including mortgage rates, will rise as the Federal Reserve eases off bond buying. Jobs growth has gotten a bit sluggish again. Gasoline prices jumped on fears of the impact of a U.S. strike on Syria. And Americans are beginning to recognize that the politicians in Washington, D.C., are playing chicken again with the budget and debt ceiling.

So we’ll wait for the third-quarter E&S numbers before considering any revision. The MAFSI reps were quite optimistic, forecasting a 6% gain in the third quarter and noting strong improvements in consultant and overall quotation activity. May it be so.

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