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Market Daily

Fast-food is one of the winners in Q4

Fast-food Following the fourth quarter, businesses from a number of industries have already begun to submit their quarterly results.

It’s a mixed bag overall, with fast food establishments doing well.

The good news is that fast-casual and casual dining establishments have had trouble luring in new customers.

The news

Even though the fourth quarter has ended, very few publicly listed restaurant firms have reported their most recent quarterly results.

The handful who made reports stressed a new pattern.

Consumers who had to deal with inflation during the Christmas season reduced their out-of-home meals and shopping.

As an alternative, fast-food restaurants have used specials and limited menus to draw in consumers from various socioeconomic backgrounds.

Economy resilience

Over the years, economic upheavals and downturns have had an impact on the market, but the fast-food industry has consistently been among the most resilient.

For instance, one of the largest fast food businesses in the sector, McDonald’s, reported same-store sales increase of 10.3%.

The rise was mostly driven by low-income consumers, who visited more frequently than they had in the previous two quarters.

According to executives, the promotion for Adult Happy Meals was a spectacular success.

They significantly increased sales when included in McRib’s annual return.

The fast-food giant’s US traffic climbed for the second straight quarter, defying industry figures.

Other chains

Yum Brands, a different fast-food chain, asserted strong US demand.

Domestic same-store sales at Taco Bell rose by 11% throughout this time.

The reasons for the exceptional sales are the rise in breakfast orders, the return of Taco Bell value meals, and the popularity of Mexican pizza.

In the US, Pizza Hut’s same-store sales climbed by 4%.

KFC experienced challenging year-over-year comparisons and a meager 1% growth.

More fast-food outlets want to improve their standing in the coming weeks.

On Tuesday, Restaurant Brands International, the parent company of Burger King, is expected to report its fourth-quarter financial results.

On February 23, Pizza Hut will announce its financial results.

A disappointing quarter

Sales at Chipotle Mexican Grill were a little dismal, despite the fact that numerous fast food restaurants reported improvements.

The company’s quarterly profits and sales on Tuesday fell short of Wall Street projections for the first time in more than ten years.

Brian Niccol, the CEO of Chipotle, informed customers that there had not been a “major reaction” to the price hikes at the fast-food restaurant.

Instead, Chipotle management offered a list of reasons for its underwhelming performance, including:

  • Bad economic weather
  • The underperforming debut of the Garlic Guajillo Steak
  • Challenging comparisons to 2021’s brisket launch
  • Seasonality

Jack Hartung, the chief financial officer at Chipotle, attributed the decline in December to the weak retail sales during that month.

“As we got around the holidays, we didn’t see that pop, that momentum, that we normally see,” said Hartung.

“Frankly, we started the quarter soft, and we ended the quarter soft.”

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Chipotle claims that in January, the amount of traffic started to increase.

However, it’s simple to draw comparisons to the Omicron outbreaks from a year ago, which compelled Chipotle and other companies to either close its doors early or for a brief period of time.

According to a research note written by Bank of America analyst Sara Senatore and released on Wednesday, the mild January weather increased demand across the board for the industry.

The public still cannot see the fast-casual food businesses’ fourth-quarter financial reports.

Shake Shack has already selected February 16 as the date.

But the huge chain of fast food restaurants admitted at the start of January that its same-store sales growth was below Wall Street expectations.

Sweetgreen will declare its earnings on February 23, while Portillo’s will do so on March 2.

The casual dining scene

Despite the fact that the fast-food sector has mostly flourished, fast-casual restaurants have faced greater challenges than casual dining locations.

Businesses that provide casual meals have a hard time recruiting new customers because Chipotle, Sweetgreen, and Shake Shack gained a reputation as superior substitutes.

Various tactics were employed by Red Lobster and Applebee’s, including substantial discounts and increased promotional spending.

For many restaurant businesses, like Brinker International, the issue already existed, and the increase in inflation did little more than exacerbate it.

The company is presently working to turn around Chili’s Grill and Bar.

Brinker said at the beginning of the month that Chili’s traffic decreased 7.6% for the three months that ended on December 28.

On the conference call, Brinker’s CEO and former US President Kevin Hochman informed investors that a dip was anticipated as the business worked to reduce its reliance on less desirable agreements.

In order to deter people from utilizing coupons, Chili’s raised its prices.

Image source: Money

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