Restaurants’ Positive Earnings Could Mask Rough Year Ahead

When America’s fast-food giants report earnings in the coming days, it should be good news.

It also could be the last good news these companies have for some time.

That’s according to a report Sunday (April 23) by CNBC, which says investors expect strong results from companies like McDonald’s, Chipotle, Domino’s, and Starbucks, all of which will report their numbers between this week and the next.

As CNBC notes, many restaurants reported impressive sales growth for January, though those results were measured against the prior year, when the pandemic forced diners to stay home.

Growth was more muted in February and March, with same-store sales up a respective 6.8% and 3.2% compared to January’s 14.1%, the report said, citing figures from Black Box Intelligence, which monitors the restaurant industry.

CNBC also reports Bank of America data that shows fast-casual and casual-dining restaurants experiencing the largest declines month over month, according to its customers’ debit and credit card spending.

As PYMNTS wrote recently, the restaurant industry was already facing bad news following recent government inflation figures, which showed restaurant inflation exceeding food inflation for the first time during this long period of price increases.

Research by PYMNTS has found that inflation has driven many consumers to switch from full-service eateries to fast-casual and casual dining establishments to deal with inflation.

Consumers are trying to rein in their dining spending by moving their restaurant spending toward quick-service restaurants (QSRs), PYMNTS data suggests.

Research from the December edition of PYMNTS’ Restaurant Digital Divide study, “The 2022 Restaurant Digital Divide: Restaurant Customers React To Rising Costs, Declining Service,” finds that more diners have been seeing price increases at full-service restaurants (FSRs) than QSRs — 70% and 62%, respectively.

In addition, findings in the report note that many consumers have been increasingly choosing lower-priced restaurants in this inflationary period. Twenty-two percent of those with an annual income of less than $50,000, 15% of those earning between $50,000 and $100,000, and 11% making more than $100,000 per year reported making this shift.

“More than ever, customers are value-conscious, and it’s on us to narrow in on what our fans want and need,” Sean Tresvant, Taco Bell’s global chief brand officer, said in an interview with PYMNTS last year.