
Investors should be struggling to decide whether the economy is entering a recession, consistent with the base case for McDonald’s 2023 business plan. However, judging by the market’s recent performance, it appears that investors are already celebrating a soft landing. But before drawing that conclusion, we need better insight into retail traffic trends which, at first blush, have been depressingly negative.
Restaurant Traffic Trends
Restaurant traffic has long been considered a key metric in gauging the health of same-store-sales growth which, in turn, represents a key consumer strength metric. While material restaurant traffic declines have been commonplace post-covid, same-store sales have been generally strong as the chains have passed through sizable, offsetting menu price increases. Also, early on, industry sales were propelled by larger group orders (with high item counts) which are now returning to normal levels.

In any case, it seems confusing that traffic has been reported as negative for both restaurants and grocery stores simultaneously – suggesting that there are fewer people eating overall as discussed in this recent post.
Notably, McDonald’s corporate recently clarified: “Guest count (traffic) is a very imprecise measure, and it’s imprecise because of what we’ve seen with delivery, but also what we’ve seen with digital, where we’re now getting multiple orders. And so, while it’s important for us to always be attentive to guest count, I think also recognize that the complexion of how customers are experiencing the restaurant has changed. So, from that vantage point, we look at things from a relative perspective.” This explanation suggests significant consumer traffic consolidation among digital/delivery orders which tend to represent a relatively small mix of total sales.
Given the importance of traffic as a measure of consumer health, it may be time to develop more accurate reporting metrics that provide a better depiction of retail momentum – metrics in desperate need of analysis with the NASDAQ up +17% for the month.