This Sector Bucks the High Unemployment Trend

Gerelyn is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

If monetary policymakers are right, high U.S. unemployment will persist until 2015. Don't look to the restaurant industry for signs of that weakness because for the most part you're likely to come up empty. Restaurants have been steadily adding jobs at more than twice the pace of the broader U.S. jobs market. That trend is expected to extend into 2013.

Restaurant Jobs vs. U.S. Employment*

  2012 2013 Estimates
Restaurant Employment +3.0% +2.4%
U.S. Total Employment +1.4% +1.5%

    *Source:  National Restaurant Association

Restaurant sales momentum has been building, as well, and is expected to continue its run right into 2013. The National Restaurant Association (NRA) projects that restaurant sales will surpass $660 billion next year, which represents an increase of nearly 4% over 2012. 

 Executive Shakeups

While the stage is set for restaurant stocks to standout in 2013, it doesn't mean that some internal struggles won't be a distraction.

Darden Restaurants (NYSE: DRI) has been taking it on the chin of late for seemingly trying to prepare the company for forthcoming changes in health care policy. The stock has suffered a 9% decline since September and there have been some top-level departures of late. Company executive Stephen Judge recently decamped from Darden to Bonefish Grill, a Bloomin Brands (NASDAQ: BLMN)  restaurant, where he will serve as president.

Judge is joining an international casual dining company that earlier this month debuted its maiden restaurant in China. The Outback Steakhouse opened earlier this month in Shanghai, a region where Bloomin Brands has identified demand for its menu offerings. Since Bloomin Brands, which was formerly known as Kangaroo Holdings/OSI Restaurants, exited private-equity ownership as an IPO in August, the stock has climbed 40% to more than $15 per share.

Previously, Judge served in a similar capacity at Seasons 52, a unit of Darden's Specialty Restaurant Group. He begins in his new role at the start of the New Year and replaces the retiring John Cooper.

It's not the first executive departure that Darden has seen in recent weeks. Last month, James J. Buettgen resigned from his post as chief marketing officer at Darden to take the helm at Ruby Tuesday (NYSE: RT)  He is replacing the retiring Sandy Beall. The abrupt departures at Darden coincide with a test that the company was running in preparation of potentially remove health benefits from full-time employees’ compensation packages -- a plan that was later scuttled.

Ruby Tuesday's Survival Kit

No doubt Ruby Tuesday is relieved to have the search to fill the top spot finished. In its fiscal 1Q, the costs relating to the search for a new chief executive shaved 16% off the company's bottom line. Ruby Tuesday broke a seven-quarter same store sales losing streak amid 1.9% same store sales growth in the period, which was a silver lining in an otherwise onerous quarter.

Buettgen joins a company that has been undergoing a restructuring for the past three years. Ruby Tuesday is focused on strengthening its balance sheet, and has reduced its debt by $171 million over the past three years. It has about $65 million in cash but owns much of its own real estate, which is valued at between $500-$600 million. The company may be pursuing lease-backs on some of that land, according to recent executive comments made at a Bank of America Merrill Lynch leveraged finance conference.

The addition of Buettgen also addresses another void that Ruby Tuesday had and that is tied to marketing. Until the restructuring, Ruby Tuesday directed its marketing budget into coupons, spending zero dollars on television ads. In an attempt to create more balance, Ruby Tuesday is weaning off of the coupons and expects to spend some $55 million on television ads through 2013, which executives expects will bolster its same-store sales comps, according to comments made at the conference.

Social Media's Role

Of course, not all of the hiring in the restaurant industry is taking place by poaching. DineEquity (NYSE: DIN), the parent company of Applebee's, has offered an unemployed Pennsylvania resident an interview all because of a Facebook status update. After asking Applebees for a job on Facebook in November, Dine Equity is footing the bill to have Kevin Matuszak flown from his home state to Kansas City for a corporate job interview next month, according to Nation's Restaurant News.

Like any industry, executive shifts are part of the game and will continue to occur. For instance, Ruby Tuesday is counting on recruiting talent from its competitors as a rung in the ladder of its reorganization plan. Even with unavoidable change restaurant companies are going into 2013 with a promising sales forecast and the best ones should be able to capitalize on that.


GerelynT has no positions in the stocks mentioned above. The Motley Fool owns shares of Darden Restaurants. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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