Which State Has The Best Consumers For Restaurants?

Barclays commented on the U.S. restaurant industry Monday and examined the financial ‘state' of consumers and how this impacted restaurants in certain regions and states.

Analyst Jeffrey A. Bernstein noted that a variety of state specific headwinds such as declining oil prices in Texas, the minimum wage increases in California and winter storms in the northeast "are cause for pause."

"By region, the Northeast is the strongest while the South is the most challenged, a reversal from just two years ago when the West the strongest while the South & Northeast the most challenged," according to Bernstein.

Dunkin Brands Group Inc DNKN and Shake Shack Inc SHAK had the greatest exposure to the Northeast.

Sonic Corporation SONC has the greatest exposure to the South, followed by Bloomin' Brands Inc BLMN and Brinker International, Inc. EAT.

The financial condition of consumers was analyzed based on metrics that included unemployment, wages, personal income, gas prices, home prices and bankruptcy filings by each state.

Figure 1 illustrates the health of consumers based on year-over-year changes in the metrics.

The darkest colored states had the financially heathier consumers according to the analysis.

Colorado and Rhode Island showed the most strength while Utah and Louisiana were the most challenged. Of the states with large restaurant exposure, Ohio and New York were the strongest, while Florida faced challenges.

Overall, the firm maintained a neutral view of the restaurant industry. However, based on the analyst note, both Dunkin Brands Group and Shake Shack have some of the best exposure to financially healthy consumers.