McDonald’s and Taco Bell owner Hume rule amid high inflation
A girl stands in line to pick up an order at a McDonald’s restaurant.
Alexey Chumachenko | SOPA images | Light rocket | Getty Images
Fast food chains look like big winners in the fourth quarter and beyond as fast and casual restaurants struggle to attract customers.
Many publicly traded restaurant companies have yet to report their latest quarterly results, but for those that have, a pattern is looming. Inflation-weary customers slashed their spending at restaurants over the holiday season, just as they were spending less than expected at retail stores. Resourceful fast food chains attracted consumers with inexpensive menus and enticing promotions, attracting customers of all income levels.
Generally, the fast food sector performs better than the rest of the industry during times of economic uncertainty and downturns.
Take McDonald’s, For example. The fast food giant said U.S. same-store sales rose 10.3%, thanks in part to low-income consumers returning more frequently than in the previous two quarters. Executives also noted the success of the Adult Happy Meal promotion and McRib’s year-over-year profits from strong sales growth. Its US traffic increased for the second quarter in a row, contrary to the industry trend.
So is the opponent Yum Brands reported strong demand in the US. Same-store Taco Bell domestic sales rose 11%, helped by increased breakfast orders, the return of Mexican pizza and its inexpensive options. Pizza Hut sales in the US rose 4%, while KFC sales rose 1% due to tight comparative results from a year ago.
Fast food revenues are expected to increase in the coming weeks. burger king owner Restaurant Brands International plans to announce fourth quarter results on Tuesday, while Domino’s Pizza will release its earnings on February 23rd.
“We just haven’t seen this pop”
In contrast to the strong performance of McDonald’s and Yum, Chipotle Mexican Grill Tuesday reported quarterly earnings and earnings that fell short of Wall Street estimates for the first time in more than five years. CEO Brian Niccol said the burrito chain’s price increase did not generate “significant resistance” from customers.
Instead, Chipotle executives provided a detailed list of reasons why its results were disappointing: bad weather, underperforming launch of Garlic Steak Guajillo, a tough comparison to last year’s brisket launch, and seasonality.
Customers order at the Chipotle restaurant at the King of Prussia mall in King of Prussia, Pennsylvania.
Mark Makela | Reuters
“As we approached the holidays, we just didn’t see the surge, the momentum that we usually see… to be honest, we started the quarter soft and we ended the quarter soft,” Chipotle Chief Financial Officer Jack Hartung said. on the company’s conference call, comparing December’s decline to weaker retail sales at the time.
Chipotle reported that traffic turned positive in January. However, the chain faces an easy comparison to a year earlier, when Omicron outbreaks forced Chipotle and other chains to shut down early or temporarily close outlets. And Bank of America analyst Sarah Senatore noted in a research note on Wednesday that unseasonably warm weather in January is supporting demand in the broader industry.
Competing fast food chains have yet to report fourth-quarter earnings. shake the shack intends to publish its results on February 16. However, in early January, it announced a tentative increase in same-store sales that fell short of Wall Street estimates. Sweetgreen must report his results on February 23, while Portillo scheduled for March 2nd.
everyday food
The problems that fast food restaurants are facing are an even worse sign for the informal restaurant segment.
For more than a decade, casual restaurants have struggled to attract customers as Chipotle, Sweetgreen and Shake Shack stole their customers. So companies like Red Lobster and Applebee’s started offering big discounts or spending big money on advertising.
Soaring inflation has exacerbated the problem, especially for restaurant companies such as Brinker Internationaltrying to flip Chili’s Grill and Bar.
A customer walks to the entrance of a Brinker International Inc. restaurant. Chili’s Grill & Bar in San Antonio, Texas.
Callaghan O’Hare | Bloomberg | Getty Images
Earlier this month, Brinker reported that Chili traffic fell 7.6% for the quarter ended December 28. Brinker CEO Kevin Hochman, the former head of KFC’s US business, told analysts on the company’s conference call that the decline was expected as it tries to shed less profitable deals. Chili’s has raised prices and reduced the number of coupons as part of its strategy.
Other full-service restaurants are expected to report their results later this month. Outback steakhouse owner Bloomin Brands scheduled to make its announcement on February 16th.
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