Restaurant Stocks Plummet 49 Percent Over Past Year

February 23, 2009 11:40 a.m. EST

New York, NY (AHN) - As the recession deepens, one of the measures taken by consumers is to stop or minimize dining out, and instead eat at home. The reduced income of restaurant owners had caused shares of the top 26 U.S. restaurant companies to plummet by an average of 49 percent from their peak over the past year.

Stocks of some publicly listed dining establishments registered almost 90 percent decline. Among them are Ruth's Hospitality, operator of Ruth's Chris Steak Houses, DineEquity, which manages IHOP and Appleby's, and Ruby Tuesday.

Standard & Poor's own index had 20 members of the restaurants and the retail industry on the brink of failing to keep up with interest payments on corporate debt.

Meanwhile, cutback on expense accounts by firms is hurting high-end restaurants, said Ronald Shaich, chief executive officer of Panera Bread. A number of diners, who still eat out, opt for establishments with lower prices such as Buffalo Wild Wings, whose stocks rose to 22 percent in 2009, following a 31 percent decline in S&P 500 by 15 percent.

Surviving the crisis well is McDonald's, which logged a 5.4 percent increase in January sales for outlets open at least for 12 months.

In New York City, the collapse of Wall Street firms affected revenues of high-end restaurants like Alto and Convivio in Midtown Manhattan. The spillover was felt during the yearend holidays as ritzy restaurants across the city suffered 20 to 40 percent lower business volume after offices canceled or toned down holiday parties, said the New York City chapter of the New York State Restaurant Association.

Given this trend, Chris Cannon, owner of Alto and Convivio, forecasts 10 to 15 percent of New York's expensive dining restaurants will shutter in the coming months.