A girl waiting in line to take an order at a McDonald’s restaurant.
Oleksiy Chumachenko | Sopa Images | Lightrocket | Getty Images
Fast-food chains are looking like big winners in the fourth quarter — and ahead — as fast-casual and casual-dining 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 emerging. Inflation-stricken customers cut back on their restaurant spending during the holiday season as they spent less than expected at retailers, Savvy fast-food chains appeal to consumers whose value menus and enticing promotions attract customers across the income spectrum.
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In general, the fast-food sector fares better than the rest of the industry during times of economic uncertainty and recession.
Take McDonald’s, For example. the fast-food giant said US Same-Store Sales climbed 10.3%, helped by low-income consumers returning more frequently than in the previous two quarters. Executives also credited the success of its adult Happy Meal promotion and the annual return of McRib for its strong sales growth. Its US traffic grew for the second consecutive quarter, bucking the industry trend.
Similarly, rival Yum Brands Reported solid US demand. Taco Bell’s Homemade same store sales Increased breakfast orders, the return of Mexican pizza and its value food climbed 11%. Pizza Hut’s U.S. same-store sales rose 4%, while KFC’s ticked up 1% as it faced a tougher quarter than the year-ago period.
More fast-food earnings are on deck in the coming weeks. owner of burger king Restaurant Brands International It is set to announce its fourth-quarter results on Tuesday, while Domino’s Pizza will post its earnings on February 23.
‘We just didn’t see that pop’
In contrast to McDonald’s and Yum’s strong results, Chipotle Mexican Grill reported on Tuesday quarterly earnings and revenue that fell short of Wall Street estimates for the first time in more than five years. CEO Brian Nicol said there hasn’t been “meaningful resistance” from customers to the burrito chain’s price hikes.
Instead, Chipotle executives presented a laundry list of reasons why its performance was disappointing: bad weather, a poor performance of garlicky guajillo steaks, tough comparisons to the previous year’s brisket launch and weather.
Customers order from Chipotle restaurant at King of Prussia Mall in King of Prussia, Pennsylvania.
Mark Makela | reuters
Jack Hartung, Chipotle’s chief financial officer, said, “When we got around the holidays, we didn’t see the pop, the momentum that we typically see … Frankly, we started the quarter soft and we Quarter soft finished.” On the company’s conference call, it compared the decline in December to weak retail sales at the time.
Chipotle said that traffic turned positive in January. However, the chain faces an easy comparison to a year ago, when an Omicron outbreak forced Chipotle and other chains to quickly or temporarily close locations. And Bank of America analyst Sarah Senatore said in a research note Wednesday that January’s unseasonably warm weather is supporting broad industry demand.
The rival fast-casual chain has yet to report its fourth-quarter earnings. shake Shack Ready to share your results on 16th February. However, in early January, it announced preliminary same-store sales growth that fell short of Wall Street’s estimates. sweet green It is expected to report its results on February 23, while portillo is scheduled for March 2.
casual-dining concerns
The struggle of fast-casual restaurants for the casual-dining segment is an even worse sign.
For more than a decade, the casual-dining restaurant has struggled to attract customers as Chipotle, Sweetgreen and Shake Shack stole away their customers. So the likes of Red Lobster and Applebee’s have turned to offering heavy discounts or spending big bucks on advertising.
Rising inflation has exacerbated the issue, especially for restaurant companies Brinker InternationalJoe’s trying to turn over Chili’s Grill & Bar.
One customer was a Brinker International Inc. in San Antonio, Texas. Chili’s Grill & Bar runs toward the restaurant’s entrance.
Callaghan O’Hare | Bloomberg | Getty Images
Earlier in the month, Brinker reported that traffic to Chile fell 7.6% for the quarter ending 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 seeks to weed out less profitable transactions. As part of the strategy, Chili’s has raised prices and cut coupons.
More full-service restaurants are expected to report their results later this month. Outback Steakhouse Owner Bloomin’ Brands It will be announced on 16 February.