Grocery stores are stealing business from McDonald’s.
Grocery prices have been falling, and as a result, a growing number of Americans are choosing to pack their lunches and eat dinner at home versus visiting restaurants, according to McDonald’s CEO Steve Easterbrook.
“There is a widening gap between food away from home and food at home, where the commodity decreases are being passed through by the grocers,” Easterbrook said on Tuesday on a call with analysts.
“So the food at home, there’s value to be had for families there, whereas eating out, there is a price-inflation environment,” he said.
Easterbrook made the remarks in response to a question about McDonald’s slowing sales growth.
McDonald’s same-store sales increased 1.8% in the second quarter of the year, down from 5.4% growth in the previous quarter.
Americans’ overall uncertainty about the presidential election and the economy have also been contributing to a slowdown industry-wide, Easterbrook said:
“I think, generally, there’s just a broader level of uncertainty in consumers’ minds at the moment, both trying to gauge their financial security going forward, you know, whether through elections or through global events, people are slightly mindful of an unsettled world. And when people are uncertain, when families are uncertain, caution starts to prevail and they start to hold back on spend.”
But McDonald’s isn’t the only restaurant affected by consumers’ spending pullback.
In fact, same-store sales have been so lackluster this year that one Wall Street analyst thinks that they may be a “harbinger” for a US recession next year.
In a note to clients published on Tuesday, Stifel analyst Paul Westra said that the slowdown “reflects the start of a US restaurant recession,” and that it “may also represent a harbinger to a U.S. recession in early 2017.”
“Restaurants have historically led the market lower during the three-to-six-month periods prior to the start of the prior three US recessions,” he wrote.
Source: Business Insider