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Jack in the Box just reported its worst sales result since 2010. | Photo: Shutterstock.<\/p>\n
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On Wednesday, McDonald\u2019s reported its best sales result in two years<\/a>. You couldn\u2019t tell from the company\u2019s earnings call. \u201cWe remain cautious about the overall, near-term health of the U.S. consumer,\u201d CEO Chris Kempczinski told analysts.\u00a0<\/p>\n Parse out McDonald\u2019s numbers and it\u2019s easy to see why he\u2019s so cautious. The fast-food giant\u2019s same-store sales rose 2.5%. But its two-year number was up just 1.8%. And considering that McDonald\u2019s also got the benefit of an ultra-strong Minecraft Movie promotion in the first week and a half of the period and you have a brand that is more or less treading water.<\/p>\n McDonald\u2019s might have a bigger share of the fast-food pie than it had the previous quarter, but it\u2019s a much smaller pie.\u00a0<\/p>\n Consider some of these numbers:<\/p>\n Jack in the Box<\/strong> on Wednesday reported a same-store sales decline of 7.1%. The last time it had a same-store sales decline that bad? 2010.<\/p>\n Del Taco<\/strong> reported a 2.2% same-store sales decline. That was its sixth straight negative number.<\/p>\n KFC\u2019s<\/strong> same-store sales were down 5% in the U.S. That\u2019s down 10% on a two-year basis. It has been flat or down for eight straight quarters.\u00a0<\/p>\n Pizza Hut U.S.<\/strong> was also down 5%. The good news is that it improved on a two-year basis from down 11% in the first quarter.<\/p>\n There are exceptions. Taco Bell reported 4% same-store sales growth, for instance, continuing its remarkable run.\u00a0<\/p>\n \u201cThe data that we look at about consumer behavior shows clear trade-in from consumers and fast-casual into the Taco Bell brand,\u201d David Gibbs, CEO of Taco Bell parent company Yum Brands, told analysts. \u201cAnd when you even pull apart the income brands, although I know the lower-income consumers are pulling back, that\u2019s been well documented by our competitors, we aren\u2019t seeing that at Taco Bell.\u201d\u00a0<\/p>\n There\u2019s also Domino\u2019s, whose 3.4% same-store sales growth looks all the more impressive given everything else going on. Yet it\u2019s dealing with some challenges of its own, namely the loss of delivery business to DoorDash and Uber Eats.\u00a0<\/p>\n Like Taco Bell, Domino\u2019s is gaining traction from lower-income consumers. It is now going directly after traditional fast-food chains on value. \u201cThere are headwinds,\u201d CEO Russell Weiner told analysts. \u201cBut actually, the headwinds I think are tailwinds for us.\u201d\u00a0<\/p>\n Still, the environment has been an ugly one all year for the fast-food world. Kempczinski told analysts on Wednesday that fast-food industry traffic among low-income diners is down in the double digits.\u00a0<\/p>\n That\u2019s coming off a not-so-good 2024, too. Fast-food burger chains last year grew total sales by just 1.3%. Pizza chains less than 1%. Sandwich chains declined by 3.25%. And those numbers were broadcast in 2023 when weakening traffic hearkened to what effectively amounts to a fast-food recession.\u00a0<\/p>\n Meanwhile, both Applebee’s<\/a> and BJ’s Restaurants<\/a> reported surprisingly strong results. Casual-dining chains outperformed fast-food brands in the first quarter for the first time in years. That is almost certain to happen again in the second quarter.<\/p>\n All this is happening while the fast-food sector has engaged in a massive value war for the past year-plus. If that value war is working, it\u2019s difficult to see how.<\/p>\n It\u2019s understandable why fast-food chains would struggle like this. They have a lot of lower-income diners. Those diners are hurting, and they\u2019ve watched prices at their chosen restaurants soar since 2019, eating into whatever wage gains they\u2019ve made over that period.\u00a0\u00a0<\/p>\n \u201cDespite improvements in wage gains, real incomes are down,\u201d Kempczinski said. \u201cThat absolutely is going to put pressure on visits into the QSR industry.\u00a0<\/p>\n \u201cSecond thing is there\u2019s a lot of anxiety and unease with that low-income consumer. I think we could all speculate the reasons for that, probably tariffs and the impact that might have, and the employment situation. The result of that is you\u2019re seeing people either skip occasions, so they\u2019re skipping a daypart like breakfast, or they\u2019re trading down either within our menu or they\u2019re trading down to eating at home.\u201d\u00a0<\/p>\n Restaurants can get customers in the door with innovative marketing, as demonstrated by the strong sales from McDonald\u2019s Minecraft promotion. But keeping them between those promotions is getting increasingly difficult.\u00a0<\/p>\n