Food Food Resigns Supreme as Restaurants Struggle With Inflation

Fast-food chains are looking like the big winners in the fourth quarter — and beyond — as fast-casual and casual-dining restaurants struggle to attract customers.

While many restaurant companies that are publicly traded have not reported their most recent quarterly results, some have begun to see a pattern. Customers that are becoming more inflation-averse have cut back on their restaurant spending during holiday season. In fact, they were spending less than expected. Shop at retailers. These fast-food chains were popular with consumers who are looking for value menus and attractive promotions. They also attracted customers from all income levels.

Generally speaking, the fast-food industry performs better during economic downturns and uncertainty than other sectors.

Take McDonald’sFor example, According to the fast-food giant, U.S. Same store sales Sales rose 10.3% due in part to lower-income consumers returning more often than they did for the past two quarters. The strong sales growth was also attributed to the success of the McRib’s annual return and the Adult Happy Meal promotion. Its U.S. traffic increased by 2% for the second quarter in a row, breaking with the industry trend.

Similar to rivals. Yum Brands reported solid U.S. demand. Taco Bell’s domestic demand a href=”https://www.cnbc.com/2023/02/08/yum-brands-yum-earnings-q4-2022.html”>same-store sales The rise in breakfast orders, return to Mexican Pizza, and value meals contributed 11% to the increase in sales. Pizza Hut’s U.S. Same-Store Sales grew by 4%, while KFC’s jumped 1% due to tough comparisons from a year ago.

In the next few weeks, there will be more fast-food earnings. Burger King owner Restaurant Brands International Domino’s Pizza is expected to release its fourth-quarter results on Tuesday.

Contrary to Yum’s strong results and McDonald’s, Yum’s is not. Chipotle Mexican Grill Tuesday report Quarterly earnings Wall Street’s expectations for revenue, and it was the first time in five years that revenues fell below Wall Street’s estimates. Brian Niccol, CEO of Burrito Chain, stated that price increases have not led to the company’s revenue falling short of Wall Street’s estimates. “meaningful resistance” From customers.

Chipotle executives instead presented a laundry of reasons why it performed poorly: poor weather, Garlic Guajillosteak’s underperformance, harsh comparisons to last year’s Brisket launch, seasonality.

“As we got around the holidays, we just didn’t see that pop, that momentum, that we normally see … frankly, we started the quarter soft, and we ended the quarter soft,” Jack Hartung, chief financial officer at Chipotle, said that December’s decline was due to lower retail sales.

Chipotle stated that January saw a positive increase in traffic. The chain faces easy comparisons to last year, when Omicron epidemics forced Chipotle and other chain restaurants to close or shutter their locations. Sara Senatore, an analyst at Bank of America, stated in a Wednesday research note that the unseasonably warm January has helped to support demand for the larger industry.

Rival fast-casual restaurants have not yet reported fourth-quarter earnings. Shake Shack It will share its results Feb. 16. It announced preliminary same-store sales growth in January but it fell short of Wall Street estimates. Sweetgreen It is expected to release its results on February 23rd, while Portillo’s March 2nd,

Even worse is the situation at fast-casual restaurants.

Since more than a decade, casual dining restaurants have struggled with customers. Red Lobster, Applebee’s and other casual-dining restaurants have started to offer deep discounts and spend big on advertising.

Inflation has risen, especially for restaurants like Restaurants International. Brinker InternationalChili’s Grill and Bar will be reopened by.

Brinker reported at the beginning of the month that Chili’s traffic had dropped 7.6% in the quarter ending Dec. 28. Kevin Hochman (Brinker CEO) was the former head for KFC’s U.S. operations. He told analysts during the conference call that this decline was to be expected as the company tries to cut down on less profitable transactions. Chili’s has increased its prices and reduced coupons as part this strategy.

Expect more full-service restaurants to report their results this month. Owner of Outback Steakhouse Bloomin’ Brands It is expected to announce its plans on February 16.