Restaurant profits may suffer despite stimulus

And with the average price of gas now topping $4 a gallon, industry analysts are also no longer expecting much improvement in the months ahead.

"Frankly, I don't think we're going to go back to the good old days," said Bob Goldin, executive vice president of consumer research firm Technomic Inc. in Chicago.

It's been a difficult year for the restaurants, which depend on consumers' willingness to spend their cash to indulge in a lunch away from their desk or a dinner out. Falling home values, higher utility bills and skyrocketing gas prices have taken a big bite out of discretionary income.

"People are looking at more restrained spending when they do go out and ordering fewer sides, less expensive cuts of meat or one beer instead of two," Goldin said.

While sales are declining, a federal minimum wage hike and big increases in commodity costs are squeezing margins at most restaurant companies, forcing chains to raise prices. That has led some consumers to gravitate more to grocery stores and cook at home.

But as economic stimulus checks poured into bank accounts and mailboxes at the end of April, things seemed to be looking up. Sales rose more than 7 percent in May from a year earlier, raising some hope that restaurants could report strong second-quarter results.

"That's a stronger sales trend than in the first four months of the year," said Morgan Keegan analyst Bob Derrington.

But by June, that boost was nearly wiped out by a more than 40-cent rise in gas prices, he said. June sales rose just 1.1 percent from a year earlier, according to Commerce Department data.

Some companies, including coffee chain Starbucks Corp., have already cut their profit outlooks because of disappointing sales and higher costs. Others--including Ruby Tuesday Inc. and Jack in the Box Inc.--have said they expect sales at locations open at least a year, to decline.