Sweetgreen, Chipotle and Wingstop aren’t seeing a shopper slowdown
A meals supply messenger carries a take-out bag exterior a Sweetgreen in Manhattan, New York Metropolis, on Sept. 14, 2023.
Jeenah Moon | The Washington Put up | Getty Photographs
Excessive-income shoppers helped Chipotle Mexican Grill, Wingstop and Sweetgreen report robust gross sales this quarter, bucking the broader consumer slowdown that is been hurting different eateries.
As a complete, the restaurant trade has seen gross sales hunch and site visitors decline as prospects pull again their spending. McDonald’s, Starbucks and KFC proprietor Yum Brands had been among the many restaurant corporations that reported a weak begin to 2024.
McDonald’s CEO Chris Kempczinski mentioned diners are looking for offers and good worth; the chain is working to introduce a $5 value meal, CNBC reported Friday. And John Peyton, chief govt of Applebee’s proprietor Dine Brands, mentioned the steepest gross sales drop-off has come from prospects making lower than $50,000.
Quick-casual chains look like the exception to the development. The sector noticed larger site visitors progress than another eating sector from November to February, based on GuestXM data.
Typically, prospects of fast-casual chains are likely to have larger incomes than these of the fast-food sector, insulating the phase considerably from low-income shoppers’ spending pullback. Excessive-income shoppers have not felt the identical pinch as these in lower-income brackets.
Wingstop noticed its same-store gross sales soar 21% within the quarter. CEO Michael Skipworth instructed CNBC that Wingstop’s buyer base was largely low-income prospects however is now roughly three-quarters higher-income diners. He additionally credited the corporate’s success to rising model consciousness and its rooster sandwich, which frequently serves as an entry level for brand spanking new prospects.
Equally, most of Sweetgreen’s places are in high-income neighborhoods, CEO Jonathan Neman mentioned final 12 months. On Thursday, the salad chain reported first-quarter same-store gross sales progress of 5% and raised its full-year outlook for same-store gross sales progress. Visitors was flat, however executives mentioned unhealthy climate and the inclusion of New 12 months’s Day and Easter damage its enterprise.
Worth counts
Chipotle and different chains have additionally gotten a lift from shoppers’ notion of their worth as the price of Large Macs and Whoppers rise.
Final 12 months, fast-food chains raised costs extra dramatically than fast-casual chains, based on TD Cowen analyst Andrew Charles. Whereas a bowl or salad from a fast-casual restaurant will nonetheless be costlier than a burger or rooster tenders, the pricing hole between the 2 segments has narrowed.
“You possibly can see that quick informal is only a superior worth for that shopper, given the standard of what they’re getting,” Charles mentioned.
For instance, Chipotle’s quarterly same-store sales grew 7%, fueled by a 5.4% improve in foot site visitors. The burrito chain has a powerful notion of worth amongst diners, CEO Brian Niccol instructed analysts on the corporate’s April 24 convention name. Chipotle executives have additionally beforehand emphasised that the majority of its prospects come from higher-income brackets.
Many fast-casual chains, together with Chipotle and Sweetgreen, have additionally been attempting to enhance their “throughput,” an trade time period that refers to what number of bowls or salads their workers could make. That concentrate on effectivity means their eating places’ service is getting sooner — resulting in extra transactions, Charles mentioned.
Traders had already been betting that fast-casual chains could be an outlier in shoppers’ eatery spending. Shares of Chipotle, Shake Shack and Wingstop have all risen no less than 35% in 2024. And Sweetgreen’s inventory has doubled in worth in the identical time, excluding its 34% increase on Friday alone. For comparability, the S&P 500 has risen roughly 9% to this point this 12 months.
However there are nonetheless exceptions to the phase development. For instance, Portillo’s, recognized for its Italian beef sandwiches and Chicago-style sizzling canines, mentioned its same-store gross sales shrank 1.2% within the first quarter. The chain blamed the weak outcomes on “depressing climate throughout the Midwest,” significantly at first of the quarter.
Likewise, Shake Shack mentioned its quarterly site visitors, which was unfavourable, would’ve been flat if not for unhealthy climate in January and February. The burger chain reported same-store gross sales progress of 1.6% however famous that the metric improved sequentially each month. In April, its same-store gross sales rose 4.9% 12 months over 12 months.
Mediterranean fast-casual chain Cava is not anticipated to report its first-quarter outcomes till Might 28. However TD Cowen’s Charles mentioned he is anticipating a stronger quarter for Cava, given its rivals’ performances.
