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Moody's Investors Service on Tuesday upgraded its rating on the U.S. restaurant industry to stable from negative, saying the fundamental credit conditions in the sector are unlikely to change materially over the next year to year and a half.
Moody's said the industry as a whole has been successful at reducing costs in response to weak consumer spending -- such as closing weak restaurants, scaling back growth and refurbishing existing restaurants with a greater focus on earnings.
Although a majority of restaurant operators continue to report negative key sales trends, the declines are decelerating and Moody's expects this to continue over the near term. Even though Moody's said it believes that industry conditions will be generally stable, performance will remain at very weak levels.
"Consumers continue to face many pressures including high unemployment, lower real estate values, and a more stringent credit environment," Bill Fahy, senior analyst at Moody's said in a statement. "In addition, we believe current consumer trends towards increasing savings, strengthening personal balance sheets and focusing more on value will continue over the intermediate term."
The negative sector outlook had been in place since May 13, 2008.