Price increase pads growth in Hong Kong restaurants

Total restaurant sales grew by 6% to HK$23.4b in 1Q2012, but sales volume shrank by 0.2%.

For the fast food sector, sales rose by 10.7% as volume went up by 5.7%. It's a different story for Chinese restaurants as sales climbed by 5.1% and volume sank by 1.6%. 

Here's more from the research by Kim Eng Hong Kong:

According to Census and Statistics Department, total restaurant sales was up by 6% YoY to HK$23.4b in 1Q2012 while the value of total purchase by restaurants were up by 5.2% YoY to HK$8.6b. The growth in restaurant industry sales were purely driven by increase in price as volume fell by 0.2% YoY in 1Q2012. For fast food sector, total sales rose by 10.7% YoY on the back of 5.7% volume growth. For Chinese restaurants, sales were up by 5.1% YoY while volume was down by 1.6% YoY.

On a quarterly basis, sales volume of the overall restaurant industry fell by 1.2% QoQ in 1Q12.

Breaking down by month, sales volume was up by 2.4% YoY in January, down by 2.7% YoY and 0.6% YoY in February and March 2012.

Overall, Kim Eng maintains its bearish view on local restaurant names as a surge in operating cost will continue to outweigh sales growth which will lead to a structural EBIT margin erosion, though food cost items such as pork price have stabilized and softened YTD.