If there’s a theme for retailers this earnings season, and especially for dining, it might be crystallized in the comments this week from McDonald’s CEO Chris Kempczinski, who told analysts: “Consumers continue to be even more discriminating with every dollar that they spend as they faced elevated prices in their day-to-day spending.”
He was referring, specifically, to the quick-service restaurant industry, but the statement holds true, elsewhere, too.
The McDonald’s earnings release shows some evidence of those pressures, as foot traffic, per management, was flat or even down in many markets, and comparable sales were in the low single-digit percentage points, but as seen here in the latest annual report, in 2023, global comp sales were 9% higher and guest counts were up 3%.
As noted here, Brinker International CEO Kevin Hochman said in a call with analysts: “Our social media team has been watching the conversation that the consumer is frustrated by fast food prices.”
Brinker’s earnings materials show that overall company sales were marked by slowing growth. In the latest fiscal third quarter, same store sales were 3.3% higher versus a year ago. That tally was 10.8% in the year ago fiscal third quarter.
In our coverage of Starbucks’s earnings, “disappointing” second-quarter 2024 results came amid “fewer visits from our more occasional customers,” Starbucks CEO Laxman Narasimhan said on a conference call accompanying the results. Revenues were down 1% year on year, and same store sales slipped 4%.
Beyond restaurants, there are some indications that consumer spending may be shifting at least a bit toward goods, perhaps at the expense of dining out. Amazon’s earnings release detailed that sales at its online stores were up 7% year over year to $54.7 billion. Sales at its physical stores gained 6% to $5.2 billion.
There’s been continued enthusiasm for subscription services, as Amazon saw 11% growth year on year to $10.7 billion. PYMNTS Intelligence found last month that streaming media and subscriptions remained a key indulgence for 25% of consumers, and even for nearly 30% of consumers living paycheck to paycheck with issues paying bills.
There was not all that much discussion of consumer trends on the call, but Amazon CFO Brian Olsavsky said that the firm “continues to keep an eye on consumer spending and macro level trends, specifically in Europe, where it appears to be a bit weaker relative to the U.S.”
During that same call, CEO Andy Jassy noted: “I would tell you that we continue to be optimistic about what we’re doing in grocery” where “consumables and canned goods and pet food and healthcare and beauty products … continues to grow at a very rapid rate.”
Citigroup CEO Jane Fraser said this week at the bank’s annual meeting that consumers are “healthy and resilient,” but are also “more discerning in their spending patterns.” Spending growth is buoyed by more affluent consumers, while individuals with lower credit scores are spending less.
The data compiled by PYMNTS Intelligence indicates that splurging on non-essential items has contributed to financial distress, a situation cited by 24% of millennials and 34% of Generation Z consumers. The wallet tightening may be a theme that resonates well beyond the ongoing earnings season.
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