Some restaurant chains sound the alarm about consumers

1:27A Chipotle restaurant in San Francisco, January 31, 2025. David Paul Morris/Bloomberg via Getty Images

In recent days, some major restaurant chains have sounded the alarm about slowing purchases, highlighting a crack in the U.S. economy as it worsens and hiring falls.

Household names like Chipotle and McDonald’s have cautioned against tagging purchases among low-income customers. The event could have significant stakes for the broader economy, as consumer spending accounts for about two-thirds of US economic activity.

A new report on Friday showed a drop in consumer sentiment in November, leaving consumer sentiment flat. Data from the University of Michigan indicate the lowest mark since 2022.

The survey came days after data from the Federal Reserve Bank of New York showed that Americans’ household debt levels had hit a record high.

Here’s what some major restaurant chains are saying about consumer weakness and what it could mean for the economy:

Chipotle

Chipotle Mexican Grill, which operates thousands of U.S. stores, blamed consumers for disappointing sales in its earnings report last week.

Same-store sales, a measure of revenue generated at existing locations, are expected to fall in 2025, Chipotle said, reversing a sales growth forecast made just months earlier.

On an earnings call, Scott Boatwright, Chipotle’s CEO, pointed to “ongoing macroeconomic pressures,” saying there was a “widening gap” between low-income and affluent customers.

Shares of Chipotle plunged more than 20% after the company reported earnings last week, contributing to a 50% drop since the start of this year.

Sweetgreen

Quick-service chain Sweetgreen has struggled in recent months, reporting a nearly 10% drop in same-store sales in the quarter ended in September compared with a year ago. That drop in sales marked a sharp reversal from roughly 5% growth in the previous year, which ended in September 2024.

Jamie McConnell, chief financial officer and accountant, said on Thursday’s earnings call that the company is “seeing a decline” in consumer numbers, particularly among low-income and younger shoppers.

“Buyers [віком] 25 to 35-year-olds are under the most pressure and make up about 30% of our consumer base,” McConnell added. Sales for that demographic dropped about 15% in the last quarter, he said.

Sales in the Northeast and Los Angeles — Sweetgreen’s two key regions that account for more than half of its revenue — showed a marked decline, McConnell said.

A customer’s drink sits on a table inside a McDonald’s Corp. flagship restaurant. in Chicago on July 22, 2019. Christopher Dilts/Bloomberg via Getty Images

McDonald’s

McDonald’s CEO Christopher Kempczynski warned analysts this week that traffic among low-income customers had fallen “almost in half” across the industry.

Traffic among higher-income customers increased, Kempczynski added, supporting the company’s revenue. Overall, same-store sales rose 2.4% for the year ended September, down slightly from 2.5% annual growth in the previous quarter.

The loss of low-income buyers comes alongside a steady rise in prices. The average cost of a McDonald’s menu item jumped 40% from 2019 to 2024, according to a company newsletter.

The company said it is absorbing the cost of some value-added meals in an effort to lower prices for cash-strapped customers.

Wingstop

Chicken wing chain Wingstop this week pointed to a drop in sales in areas where customers tend to have lower incomes. Speaking to analysts, Wingstop CEO Michael Skiworth warned that the poor performance had spread to “more geographies, as well as middle-income consumers in some areas.”

Sales of the company in the same stores in the domestic market. fell more than 5% in the three-month period ending in September compared to the same quarter last year.

“We think it’s only temporary,” Skiworth added, but he admitted, “None of us can predict the duration.”

Source: abcnews.go.com