Tariff-fueled recession fears that have rocked stocks in March don’t appear to be damaging higher-income consumers’ desire to buy salad bowls and burritos.
Sentiment on consumer demand remains strong this month for two of the fast-casual industry’s bellwether chains, Chipotle (CMG) and Sweetgreen (SG), per Bank of America analyst Sara Senatore.
Senatore hosted executives from six restaurant companies at BofA’s consumer conference this week: Chipotle, Sweetgreen, Brinker International (EAT), Restaurant Brands (QSR), Texas Roadhouse (TXRH), and Cracker Barrel (CBRL).
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«Chipotle is seeing strong consumer sentiment and feedback with little divergence in behavior between the income cohorts – noting strong growth in sides and attach,» Senatore said in a client note, following a meeting with Chipotle’s head of investor relations.
Chipotle reiterated expectations for flat transaction growth in the first quarter, an important indicator that demand hasn’t changed much since Chipotle reported earnings a few weeks ago.
The vibes were similar for Sweetgreen, Senatore pointed out after chatting with the CFO.
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«Sweetgreen reiterated commentary provided at its fourth quarter earnings call (on February 26), highlighting that demand began to pick up as severe weather, which impacted January (including LA fires) and much of February, dissipated,» Senatore wrote. «In newer markets like Texas, Atlanta, Florida, and the upper Midwest Sweetgreen is seeing consistently very strong comparable sales trends where menu innovation (protein plates, steak) and successful marketing around new store openings have proven effective.»
Worries about the pace of consumer spending have hammered the stock prices of fast-casual restaurants.
Shares of Sweetgreen are down 10% in the past month, Chipotle has shed 15%, and Cava has lost a whopping 41%. Shake Shack (SHAK) has plunged 24%
Only time will tell whether the sell-offs have been overdone.
«We did not hear from any companies suggesting there’s clear sailing ahead for the consumer (although Cava sounded still-strong re: outlook) or any real material pivot from fourth quarter earnings call commentary (e.g., expecting a choppy consumer backdrop in 2025),» Citi restaurant analyst Jon Tower wrote earlier this week. «But stock price movements across the space over the past week did not seem to fit to the tone from the nine restaurant management teams in attendance.»
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