A messenger delivers food with takeout bags outside Sweetgreen in Manhattan, New York City, on September 14, 2023.
Jeenah Moon | Washington Post | beautiful images
High-income consumers have helped Chipotle Mexican Grill, block the wings And sweet blue reported strong sales this quarter, driving a broader range consumer recession That’s hurting other eateries.
Overall, the restaurant industry has seen sales decline and traffic decline as customers pull back on spending. McDonald’s, Starbucks and KFC owner Yum brand are among restaurant companies reporting a weak start to 2024.
McDonald’s CEO Chris Kempczinski said diners are hunting for good deals and value; chain is working to Introducing a $5 meal, CNBC reported on Friday. And John Peyton, CEO of owner Applebee’s Dinner brandsaid the sharpest decline in sales came from customers earning less than $50,000.
Fast-casual chains seem to be the exception to this trend. According to the report, this sector had higher traffic growth than any other food and beverage sector from November to February. GuestXM data.
In general, customers of fast food chains tend to have higher incomes than customers in the fast food sector, somewhat insulating this segment from the decline in spending by lower-income consumers. low input. High-income consumers do not feel the same hardship as those with lower incomes.
Wingstop saw same-store sales increase 21% in the quarter. CEO Michael Skipworth told CNBC that Wingstop’s customer base used to be largely low-income customers but is now about three-quarters higher-income diners. He also noted the company’s success in raising brand awareness and its chicken sandwich, which often serves as an entry point for new customers.
Similarly, most Sweetgreen locations are in high-income neighborhoods, CEO Jonathan Neman said last year. On Thursday, the salad chain reported first-quarter same-store sales growth of 5% and improve the outlook for the whole year for same-store sales growth. Traffic was flat, but executives said bad weather and the addition of New Year’s Day and Easter had affected the company’s business.
Number of values
Chipotle and other chains also received a boost from consumers’ perception of their value as the prices of Big Macs and Whoppers rose.
According to TD Cowen analyst Andrew Charles, last year, fast food chains increased their prices more rapidly than regular fast food chains. While a bowl or salad from a budget restaurant will still cost more than a burger or chicken tender, the price gap between the two segments has narrowed.
“You can see that fast casual is just an outstanding value for that consumer, given the quality of what they’re getting,” Charles said.
For example, Chipotle’s quarterly report Same-store sales increased 7%, driven by a 5.4% increase in foot traffic. CEO Brian Niccol told analysts during the company’s April 24 conference call that the burrito chain has a strong perception of diner value. Chipotle executives have also previously emphasized that most of their customers come from higher income brackets.
Many fast-casual chains, including Chipotle and Sweetgreen, are also trying to improve their “productivity,” an industry term for the number of bowls or salads their employees can make. Charles says the focus on efficiency means their restaurant’s service is getting faster – leading to more transactions.
Investors have bet that fast-casual chains will be an outlier in consumer dining spending. Shares of Chipotle, Shake Shack and Wingstop are all up at least 35% in 2024. And Sweetgreen’s shares have doubled in value over the same period, excluding increased by 34% on Friday alone. By comparison, the S&P 500 is up about 9% year to date.
But there are exceptions to the segmentation trend. For example, by Portillo, known for its Italian beef sandwiches and Chicago-style hot dogs, said same-store sales fell 1.2% in the first quarter. The chain blamed the weak results on “severe weather across the Midwest,” especially early in the quarter.
Similarly, Shake the shack said its quarterly traffic was negative, which would have been flat had it not been for bad weather in January and February. The burger chain reported same-store sales growth of 1.6% but noted that the metric improved sequentially month over month. In April, its same-store sales increased 4.9% year over year.
Mediterranean-style fast food chain Cava is not expected to report first-quarter results until May 28. But TD Cowen’s Charles said he expected Cava to have a better quarter, based on the performance of its competitors .
