Restaurant spending improved in August, although operators will likely continue prioritizing value offerings throughout the remainder of 2024 amid a challenging macroeconomic backdrop, according to UBS Securities. The financial results released last week by Darden Restaurants and Cracker Barrel underscore the notable enhancements in traffic and sales trends following a pressured July, as noted by UBS analyst Dennis Geiger.
Data shows that restaurant and bar spending in August experienced growth at more than double the year-over-year pace compared to July. Additionally, the proportion of restaurant spending relative to the consumer wallet increased by 10 basis points from July to August. Restaurant spending climbed by 50 basis points to reach 56.4% of total expenditures on restaurants and groceries. Cracker Barrel reported revenue growth for the fiscal fourth quarter that fell short of analysts' expectations.
Geiger identified that the results highlighted persistent pressure within households earning less than $60,000, a trend that continues to emerge from industry discussions. Darden, the parent company of Olive Garden, faced challenges as their top- and bottom-line fiscal first-quarter results missed Wall Street's projections due to sluggish traffic in July.
Nevertheless, the company reiterated its full-year outlook, with Chief Financial Officer Raj Vennam noting that sales trends have shown continued improvement since July. The results from these companies, along with other industry checks, indicate a growing emphasis on value within promotional strategies, marketing efforts, and service offerings.
Geiger stated, "We expect the focus on value to remain a pertinent narrative across restaurant segments as brands seek to maintain traffic in a troubled macroeconomic environment." The year-over-year same-store sales trends for casual dining experienced an improvement of 450 basis points in August as traffic rebounded, according to UBS's findings, which utilized Knapp-Track data.
Despite the positive trends, traffic continued to show negative figures, declining by 2.5% year over year in August, although this represented the best level recorded since October 2023. Geiger suggested that the uptick likely reflects the effectiveness of enhanced marketing and promotional activities, showcasing the resilience and adaptation of the restaurant sector in a competitive and evolving marketplace. Price: 172.31, Change: +2.14, Percent Change: +1.25.