US restaurants set for second-half profit boost as costs ease, demand stays firm
By Deborah Mary Sophia
(Reuters) — Restaurant chains including McDonald's (NYSE:MCD) and Chipotle Mexican Grill (NYSE:CMG) are expected to report strong profits in the second half of 2023 as commodity costs finally ease at a time when demand for items including burgers and tacos has remained fairly resilient.
U.S. restaurant chains kick off their quarterly earnings this week, with some top names such as Starbucks (NASDAQ:SBUX) and KFC-parent Yum Brands set to report results next week.
Investors will be keen to see how the American fast-food customer is faring amid still-high food prices and a pressured overall spending environment.
«When looking at current industry fundamentals, it is hard not to be encouraged» despite the looming risk of a recession at some point in 2023, Barclays (LON:BARC) analyst Jeffrey Bernstein said.
Meanwhile, prices of commodities such as chicken and dairy have eased, offsetting higher costs of some items like beef and potatoes, while wage pressures have also stabilized, with restaurants now back to operating a fuller workforce.
THE CONTEXT
Even as footfall has remained choppy with lower-income consumers ordering fewer items or visiting outlets less often, Wall Street analysts have said fast-food companies are yet to see a notable sales slowdown.
With the U.S. economy now moving into disinflation mode, consumer confidence touching a near 1-1/2-year high in June, and spending in April also increasing more than expected, analysts have said restaurants would continue to take back market share from food-at-home channels such as grocers and supermarkets.
Visits to McDonald's rose 8.4% in the second quarter, Starbucks saw a 6.9% jump and Chipotle a 15.7% increase, data from Placer.ai showed.
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