Restaurant Chains Are Forecasting Better Results This Year. Here's Why Investors Should Think Twice About Believing Them

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David Jagielski, The Motley Fool

Sat, Mar 15, 2025, 1:00 PM 4 min read

It's been a pugnacious commencement to the twelvemonth for edifice chains. People are scaling backmost connected spending owed to uncertain economical conditions, and restaurants aren't capable to simply trust connected terms hikes to boost their apical lines anymore. The past 4th of 2024 showed signs of weakness already, and things whitethorn deteriorate further successful the months ahead. It whitethorn yet beryllium connected however tariffs impact customers and businesses.

Some large edifice chains, including McDonald's (NYSE: MCD) and Chipotle Mexican Grill (NYSE: CMG), are expecting stronger numbers arsenic the twelvemonth goes on. But that's by nary means a definite thing. Here's wherefore they could beryllium wrong, and wherefore investors whitethorn privation to workout caution erstwhile looking astatine buying restaurant stocks close now.

For investors, the large fig to support an oculus connected erstwhile it comes to edifice stocks is not needfully income but comparable income growth, which tells you however good the concern has been increasing organically. The comparable fig excludes the effect of caller store openings and closures, truthful it provides much of an apples-to-apples comparison.

And that's a problem. For the past 3 months of 2024, McDonald's comparable store income roseate by conscionable 0.4% globally. In the U.S., they were down 1.4%. Chipotle, which is smaller successful size but known for being a apical maturation stock, reported comparable income maturation of 5.4% during the aforesaid timeframe. That's amended than McDonald's, but a twelvemonth ago, that maturation complaint was 8.4%.

Despite the concerning figures, some McDonald's and Chipotle are expecting things to amended arsenic the twelvemonth progresses. Ian Borden, main fiscal serviceman astatine McDonald's, says that the institution expects "gradual stabilization of the macroeconomic and user environment." Chipotle besides expects things to amended successful the 2nd half, erstwhile they'll spell up against weaker comparable numbers from the erstwhile year. Neither institution appears to beryllium bracing for a large economical slowdown.

No 1 wants to foretell the worst, but the world is that commercialized wars and worsening economical conditions could person a devastating effect connected some income and profits for restaurants. Even though these chains whitethorn connection discounts to lure successful customers, different alternate whitethorn impact simply eating astatine home.

Costco Wholesale recently reported its earnings, and it has noted a alteration successful user habits -- they're spending much connected nutrient astatine home, which tin see things similar prepackaged nutrient items and frozen meals. Management sees radical simply being much cautious successful what they are spending their wealth on.