- 1Q23 results from the major public retail chains painted a picture of low-income consumers struggling with inflation, higher interest rates and lower Snap payments & tax refunds. Consumer stress is also evident by theft rate increases.
- What is the macro direction from here? According to the Philly Fed forecast, the economy is expected to bottom at the end of 2023 before ramping back up during 2H24. The forecast also calls for moderating inflation & stable unemployment.
Capital Markets Commentary
- May wasn’t a great month for QSR stocks, with a median decline of -2.4%. This reflects the struggles of the lower-income demo which is a key target market for fast food. All-the-same, we see strong results from a few of the names which are demonstrating financial turnarounds like Carrols (largest Burger King franchisee) and chains like BurgerFi & Sweetgreen that investors deem reparable after steep 1-year stock losses.
- Full serve chains were punished more severely in May, reflecting the more discretionary nature of this segment.
- A sharp increase in Ruth’s Hospitality stock price reflects Darden Restaurants announcement to acquire the chain on 5/3/23.