Earnings Show Fast-Food Giants Embroiled in a Game of Chicken

Where’s the beef? No one cares — show us to the poultry, please. 

Last week delivered a bevvy of earnings reports from fast-food giants — including McDonald’s, Wendy’s, Yum! Brands, and Restaurant Brands International — with the results showing the industry’s biggest trend continues apace: Customers can’t get enough chicken, especially when offered at a discount.

Winner, Winner, Value Chicken Dinner

First things first: Amid a prolonged period of economic uncertainty, the value menu remains invaluable. But even a price war among the world’s biggest restaurant chains isn’t enough to keep low-income consumers coming through drive-throughs. Instead, they continue to flee fast food in favor of value grocery stores, R.J. Hottovy, head of analytical research at Placer.ai, told The Daily Upside. In what may be a macroeconomic bellwether, Hottovy also said low-income consumers are increasingly shifting down even from value grocery chains like Aldi to cheaper convenience stores and dollar stores.

Still, value remains a big driver. So much so that in its second-quarter earnings call on Friday, Wendy’s said a major driver of a sales decline (that still beat analysts’ expectations) was having too many promotions, which interim CEO Ken Cook said “sent too many different messages” to customers. “We learned that when we have too many priorities, we have none,” Cook added, before saying that Wendy’s will have one top priority through the rest of the year: chicken. (McDonald’s seemed to crack the code this past quarter, citing the return of its McCrispy Chicken Strips driving sales growth.)

For more evidence of chicken fever, look no further than Yum’s portfolio:

• True, not even chicken could save the colonel: Same-store sales at US Kentucky Fried Chicken locations slid 5%, as the chain continues to suffer amid increased competition from the likes of Raising Cane’s and Wingstop.
• But Taco Bell saw US same-store sales growth of 4%, with Yum citing a new line of Crispy Chicken menu items and the reintroduction of chicken nuggets. In fact, Yum CEO David Gibbs said Taco Bell’s chicken sales are up 50% in the past two years. 

“Most people are reporting negative quarters. We haven’t even had a negative week for Taco Bell,” Gibbs said.

Extra Guac, Please: Pricier chains are facing the same pressures — and struggling. Shares of Sweetgreen plunged more than 25% on Friday after the chain lowered its profit guidance for the second consecutive quarter. Meanwhile, Chipotle experienced its second straight quarter of same-store sales declines, with CEO Scott Boatwright saying the chain needs to figure out how to “communicate value and showcase value.” Did you catch that, Chipotle employees? To our ears, it sounds like your CEO is practically begging you to give us a scoop of guacamole on the house.