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Restaurants expected to report strong sales growth amid wide concerns

By Nithya Bose in US business news, posted April 24, 2023

Restaurant chain investors are expecting strong first-quarter results, but the path may be challenging for the rest of the year.

Leading players in the sector, McDonald’s, Chipotle Mexican Grill, and Domino’s Pizza will release their quarterly results next week.

Starbucks, Burger King’s parent Restaurant Brands International, and Taco Bell’s owner Yum Brands are set to post earnings reports the following weeks.

When restaurants announced their fourth-quarter reports in February, many lauded impressive sales growth in January.

However, the sector had smaller growth in February and March.

Bank of America data shows that fast-casual and casual-dining restaurants had the worst month-over-month sales loss.

While inflation surged last year, investors were concerned about customers' willingness to spend more at restaurants.

Usually, fast food and coffee shops do better during economic downturns due to their cheap rates and image of affordable luxury.

Even when inflation decreases, some diners continue to cut back on their restaurant spending.

Bank of America Securities analyst Sara Senatore noted that investors would likely turn to April for more clarity on consumer-spending patterns.

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Morgan Stanley analyst Brian Harbour said the first quarter of this year “is likely the last quarter of outsized pandemic-era comps.”

Weak traffic numbers have been an ongoing issue for many restaurants, with some notable exceptions like McDonald’s.

Stifel analyst Chris O’Cull said businesses might pause raising their sales forecasts despite a successful first quarter, given the growing belief that a recession will happen later in 2023.

Source: CNBC

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