U.S. restaurants have been a beacon of hope in the bleak brick-and-mortar retail picture, but they now face trouble, analysts at ratings agency S&P Global warn.
“Already, cracks are showing across our rated restaurant universe,” Diya G. Iyer, S&P’s primary credit analyst, wrote in a note to clients this week, Axios reports. Iyer worries rising wages and increasing delivery costs will weigh on fast food restaurants while changing millennial dining preferences will hurt casual dining. Despite some improving brands, the rise of food halls and continued pressure on lower-income households this year will work against much of the fast casual and fast food sector, Iyer says. Pizza Hut, Wendy’s and BossCo (parent of Checkers) have all been downgraded to CCC+ ratings with negative outlooks.
“A new normal is unfolding,” Iyer says, with U.S. restaurant sales increasing only 3.6% last year versus a compound annual growth rate of 6.4% between 1970 and 2019, according to the National Restaurant Association.
But the most concerning development is that industry traffic hit a 9-year low with a 4% reduction in February, while the average cost of a check in restaurants hit a 10-year high, according to U.S. restaurant industry benchmarker MillerPulse. Read the full story.