The answer is in the fries.
If you're looking for a cheap indicator, you might want to keep an eye out for julienne-cut French fries, which originated in Belgium (or possibly France) and serve as a side dish for almost any meal.
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While consumers seem to be cutting back on eating out, they still want to have their fries and eat them too.
“We're seeing (consumers) visiting Burger King, Wendy's and those types of places less, and at the same time, items like French fries are appearing more and more on their shopping lists,” said Molly McFarland, founder and chief revenue officer of advertising technology. company AdAdapted, said store brands.
“This indicates that people are saying that they are not going to have dinner or fries at McDonald's,” he added. “They'll get a bag of frozen chips and make them at home.”
This change does not occur overnight. Total sales of frozen French fries for the 52 weeks ended Oct. 6 rose 3.3% in dollars to $2.14 billion, but were down 0.4% in units, according to data from the market research firm. Circana.
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Last month, food producer Lamb Weston, which gets about 14% of its sales from McDonald's (DCM) said it had closed a plant in Connell, Washington, cut about 4% of its global workforce and eliminated some vacant positions.
“Restaurant traffic and demand for frozen potatoes, relative to supply, remain weak and we believe they will remain weak for the remainder of fiscal 2025,” CEO Tom Werner said.
king burger
Burger chain CEO sees difficult environment
McDonald's recently reported that global comparable sales declined 1.5% in the third quarter, while net income declined 3%. Comparable sales reflect sales trends in stores open at least one year.
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Restaurant operators reported a modest improvement in comparable sales and customer traffic in September, although readings for both indicators remained negative, according to the National Restaurant Association.
Looking ahead to the next six months, the trade group said, restaurant operators' prospects for both sales and the economy remain uncertain.
Josh Kobza has seen that slowdown in consumption on his end of the fast food chain.
The CEO of Restaurant Brands International (QSR) owner of fast food chains such as Burger King, Tim Hortons and Popeyes, cited some of the challenges facing the Toronto company.
“Our teams and franchisees are doing a good job navigating difficult macroeconomic and competitive environments in the US, Canada and many of our international markets,” Kobza told analysts during its recent third quarter earnings call.
Kobza attempted to make lemonade out of lemons, highlighting performance relative to its rivals.
“Although slightly slower than earlier in the year, our results were well ahead of some of our larger global peers and reflect great work from our partners around the world,” he added.
Still, slowing demand is evident globally, with strong countries offset by weak demand elsewhere.
Burger King grew in key markets such as Australia, Spain, Korea, the United Kingdom and Japan, but the chain faced weaker demand in France and “pressures from the difficult operating environment in China and the conflict in the Middle East,” it said.
Fast food chain reports lackluster third-quarter results
The company's adjusted profit of 93 cents per share was up from 90 cents a year earlier, but missed analysts' consensus forecast of 95 cents.
Revenue totaled $2.29 billion, again exceeding last year's figure of $1.83 billion, but falling short of Wall Street's forecast of $2.31 billion.
Global comparable sales rose an anemic 0.3% in the quarter.
Among the company's reporting segments, comparable sales increased 2.3% at Tim Horton's, up from positive 7.6% a year ago. 'They were down 4.8% at Firehouse Subs versus an increase of 3.6% a year earlier, 0.7% at Burger King and 4% at Popeyes.
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Burger King's comparable sales fell 0.7% for the three months ended September 30. Analysts expected the metric to remain stable from a year ago.
Restaurant Brands International shares are down 12.6% so far this year and are up less than 1% from a year ago.
Analysts weigh in on Restaurant Brands business
Investment firms released research reports after the company released its quarterly results.
CIBC lowered its price target on Restaurant Brands to $86 from $88, while maintaining an Outperform rating on the stock.
The investment firm said Restaurant Brands relied on operating leverage to drive online earnings performance despite weaker-than-expected sales growth across all brands and geographies.
The company tempered its fiscal 2025 estimates to reflect “weaker for longer” comparable sales and a weaker unit growth outlook.
RBC Capital analyst Christopher Carril lowered the company's price target for Restaurant Brands to $90 from $95, but affirmed an Outperform rating on the stock.
Carril said the company reported a mixed quarter. The company posted a 2.5% revenue loss, the analyst said. On the positive side, Restaurant Brands is proving it can manage expenses in a challenging macroeconomic environment.
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Carril said this could give investors confidence in some level of earnings support next year.
KeyBanc analyst Eric Gonzalez lowered the company's price target for Restaurant Brands to $78 from $80 and maintained an Overweight rating on the stock.
Gonzalez noted that the company's results fell short of consensus forecasts as Restaurant Brands faced macroeconomic and competitive challenges during the period.
The company lowered its full-year outlook for systemwide sales to 5% to 5.5% and unit growth to 3.5%.
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