Fast-food chains are looking like the big winners in the fourth quarter — and beyond — as fast-casual and casual-dining restaurants struggle to attract customers.
Many publicly traded restaurant companies haven't reported their latest quarterly results yet, but for those that have, a pattern is emerging. Inflation-weary customers pulled back their restaurant spending during the holiday season, just as they spent less than expected at retailers. Savvy fast-food chains appealed to those consumers with value menus and enticing promotions, drawing in customers across the income spectrum.
Generally, the fast-food sector fares better than the rest of the industry during times of economic uncertainty and downturns.
Take McDonald's , for example. The fast-food giant said U.S. same-store sales climbed 10.3%, helped in part by low-income consumers returning more frequently than they had for the prior two quarters. Executives also credited the success of its Adult Happy Meal promotion and the annual return of the McRib for its strong sales growth. Its U.S. traffic increased for the second consecutive quarter, bucking the industry trend.
Likewise, rival Yum Brands reported solid U.S. demand. Taco Bell's domestic same-store sales climbed 11%, boosted by increased breakfast orders, the return of Mexican Pizza and its value meals. Pizza Hut's U.S. same-store sales grew 4%, while KFC's ticked up 1% as it faced tough year-ago comparisons.
More fast-food earnings are on deck in the coming weeks. Burger King owner Restaurant Brands International is slated to announce its fourth-quarter results on Tuesday, while Domino's Pizza will post its earnings Feb. 23.