Dining out these days might seem like a luxury for Americans pinched by inflation. For some restaurants, it feels like a battle to get them to spend.
Starbucks reported a 3% decline in same-store sales during its latest quarter, marking its first decline since 2020 and a sharp contrast to a 12% gain the prior year. Same-store sales tumbled 11% in China, the coffee chain's second-biggest market. Starbucks also lowered its full-year sales outlook.
The coffee giant said that customers are spending more cautiously and less frequently, weighing on the company's top line.
"Many customers have been more exacting about where and how they choose to spend their money, particularly with (pandemic) stimulus savings mostly spent," said Starbucks CEO Laxman Narasimhan on the company's earnings call.
That's in line with what companies have reported over the last several months: Consumers are tightening their purse strings as they grapple with sky-high interest rates, sticky inflation, depletion of pandemic-era savings and an uncertain economic outlook.
Now, companies say they're stepping up to win customers' dollars. Starbucks is rolling out sugar-free customization options for drinks, a zero-to-low-calorie energy beverage and new upgrades to its mobile app to both attract new customers and encourage "occasional customers" to order more frequently.
Americans have turned to eating at home to save money in light of rising menu prices. Prices of food consumed at home were unchanged on a monthly basis in the March Consumer Price Index report, prices away from home prices gained 0.3% from the prior month.
This shift in consumer behavior to eat more home-cooked meals has shown up in McDonald's balance sheet. The fast-food chain reported global same-store sales growth of just 1.9% during the first quarter, down from 12.6% growth the year before.
The fast-food chain, which has previously flexed its pricing power with its loyal customer base, acknowledged earlier this year that people are becoming fed up.
"Everybody's fighting for fewer consumers or consumers that are certainly visiting less frequently, and we've got to make sure we've got that street fighting mentality to win irregardless of the context around us," said Ian Borden, global chief financial officer at McDonald's, during a call with analysts.
Lower-income customers are also continuing to tighten their budgets. Olive Garden-parent Darden Restaurants saw same-restaurant sales dip during its most recent quarter. The company said that it saw a decrease in sales from households with incomes below $75,000 compared to last year, and every brand in Darden's portfolio saw a decrease in transactions from households with incomes below $50,000.
"The lower-income consumer does appear to be pulling back," said Darden Chief Executive Ricardo Cardenas in the company's earnings call.
Still, higher-income customers appear to continue spending, helping prop up the economy. Darden saw sales from households with incomes above $150,000 climb from the prior year.
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