There is one month left in 2024 and it’s a good bet that U.S. fast-food chains would love to see that month go by quickly.
In a quarter in which sales and traffic growth were difficult to come by unless you were among an extremely select group of fast-casual concepts, the nation’s quick-service chains produced a series of topline sales reports that were underwhelming at best.
Eight fast-food chains have reported same-store sales of at least negative 2%. The environment is such that companies like McDonald’s and Wendy’s can boast that they’re taking share despite generally flat comparable-store sales.
On average, fast-food chains reported a 1.3% decline, compared with a 0.2% average growth for the 45 restaurant chains that have reported earnings thus far.
As we’ve noted before, there are signs that the fast-food market is turning. But last quarter the sector led our list of losers for the earnings season.
Here are other winners and losers from a difficult period.
Winner: Cava
You’d be hard-pressed to find a restaurant chain that has so thoroughly enjoyed its post-IPO life. These are Cava’s same-store sales the past five quarters: 14.1%, 11.4%, 2.3%, 14.4% and 21%.
It was the top-performing restaurant chain based on same-store sales and traffic results, besting Wingstop. On a two-year basis its same-store sales increased 35% last quarter.
The interesting thing about the current market is the sheer level of outperformance some restaurant chains are boasting right now. Cava, at least last quarter, performed better than anyone else.
Loser: The One Group
The One Group, which owns the high-end steak house STK, the sushi specialist Kona Grill and now Benihana, has reported some extreme same-store sales results since the pandemic. But it has lost considerable ground over the past couple of years.
Kona was the worst performing restaurant chain last quarter among companies that have reported, with a 17% decline in the quarter. STK reported an 11% decline. The newly acquired Benihana was the best performer of the bunch, with a 4.2% decline.
A few brands are still recovering from the hangover they got when sales surged coming out of the pandemic and The One Group is clearly one of them. The company’s stock has lost about half its valuation this year, in part based on a series of weak sales results.
Winner: Taco Bell
The Mexican fast-food chain has looked quite good this year as most of its quick-service cohorts have struggled. Same-store sales last quarter rose 4%, continuing a run of sales growth that has been largely uninterrupted since the pandemic.
Taco Bell is in many ways built for an environment like this. It has long had a reputation for low-priced food and its menu lends itself to relatively easy innovation. The company has been able to do both this year with great success.
KFC
On the other end of the Yum Brands spectrum is KFC, which has struggled badly in the past few quarters. The company has reported flat or declining same-store sales for the past five quarters, including a 5% decline last period.
KFC was one of the few chains that thrived during the pandemic, largely on the strength of the sale of buckets of chicken. But it has lost considerable momentum, even as customers eat chicken by the boatload.
Winner: Cracker Barrel
Talk about a timely earnings beat. Cracker Barrel last month reported 2.9% same-store sales growth, its best performance in nearly two years and a strong result compared with other full-service chains, particularly those in the family-dining sector.
As a bonus, the company was able to report its preliminary results just a few days before the vote on its proxy fight against longtime activist investor Sardar Biglari. We don’t necessarily think the result would have been much different, but it was a last-minute shot against the shareholder.
Loser: Applebee’s
It’s really difficult to operate as a full-service chain in this environment. But it’s brutal to do so when your longtime rival is outperforming you by a ridiculous 2,000 basis points. Chili’s same-store sales rose 14.1% last quarter. On a two-year basis, Chili’s outperformed Applebee’s by about 2,800 basis points.
Winner: Dutch Bros
Speaking of outperformance, let’s talk about the drive-thru coffee chain. Dutch Bros was the top-performing quick-service chain last quarter, with 4.1% same-store sales growth despite its presence in California.
That came as Starbucks, longtime leader of the coffee category, reported a 6% decline in same-store sales and a 10% decline in traffic. While we can’t necessarily say that it was the beneficiary of Starbucks refugees, the larger chain’s weakness sure didn’t hurt.