Evercore's recent consumer-restaurant review finds a divergence between casual dining and quick service performance in the U.S. over the spring. After posting modest growth at the start of the year, fast-food same-store sales slipped into contraction in both April and May, while casual-dining chains sustained positive comps.
The research note reports that U.S. fast-food same-store sales fell 0.5% in April and again in May, with trends weakening further to around negative 1% in the second half of May. Earlier in 2024, quick service had recorded sequential gains of 0.5%, 2%, and 1% in January, February, and March, but those gains did not persist into April and May.
In contrast, Evercore found casual dining same-store sales expanding in the 2% to 3% range, a performance that outpaced the quick-service segment despite expectations for stronger results among some fast-food operators in the first half of the year.
The firm notes a few factors that could support a rebound into June. Weather improved after a cool, damp May, leading to some optimism for better traffic. Marketing programs at major chains, including McDonald’s FIFA collaboration, are expected to intensify. Evercore also cites the possibility that consumers could adapt to recent increases in gasoline prices, which might temper the near-term impact on restaurant visits.
Casual dining appears to have received support from a double-digit rise in tax refunds and from gains in asset prices, including equities. However, Evercore cautions that those tailwinds did not translate into consistent improvement for most chains. Among top steakhouse operators, Texas Roadhouse and Darden’s LongHorn showed signs of benefiting from the tax- and wealth-linked uplift, but both face the prospect of higher beef costs if a planned Mexican border reopening is delayed because of screwworm concerns in the U.S.
Evercore continues to favor Brinker International among casual dining stocks. The firm also revised same-store sales estimates for a set of brands spanning casual and quick service - including Chili’s, Chipotle, Tim Hortons, Burger King, Popeyes, and Taco Bell.
The research note highlights consumer behavior shifts by age cohort, reporting that Gen Z and Millennials are pulling back on restaurant visits. Evercore’s franchisee lender survey points to a deteriorating willingness among lenders to provide funding for many franchisees, a dynamic that could affect investment and expansion decisions across chains. Meanwhile, Starbucks’ same-store sales trends are described as remaining strong.
Market snapshots referenced in the note include: SBUX -1.83% | DRI -2.43% | CMG -1.95% | TXRH -2.94% | EAT -2.68% | QSR -1.28%.