Restaurant Industry Faces Tough Macro Backdrop, With Favorable Views on Certain Big Companies, Seaport Says
The restaurant industry is expected to continue to face a challenging consumer backdrop amid elevated inflation and macro pressures, Seaport Research Partners said, adding that it is generally optimistic on certain major companies in its coverage.The industry's same-store sales are expected to remain in a growth range of 1% to 2% through the end of 2026, with traffic remaining negative, the brokerage said in a note to clients Tuesday. Seaport projects same-store sales to hover around the low-single-digit level next year."Restaurant industry (same-store sales) growth has held steady in the low-single-digit range in each month of 2026 thus far," Seaport senior analyst Eric Gonzalez wrote. "For the remainder of the year, we expect the current status quo to continue."Industry traffic fell in each of the 21 months between December 2024 and August 2026, while same-store sales growth was positive in 19 months, averaging about 1.2%, according to the note.Seaport doesn't expect macroeconomic conditions to materially improve this year. Last week, official data showed that consumer inflation in the US reached a three-month high in August, amid elevated energy costs, with the food index rising at a steady pace of 0.1%.Seaport initiated coverage of Dutch Bros (BROS), Cava Group (CAVA), Restaurant Brands International (QSR), Yum Brands (YUM), Brinker International (EAT), Darden Restaurants (DRI) and Texas Roadhouse (TXRH) shares with buy ratings. The brokerage initiated coverage on the stocks of McDonald's (MCD), Starbucks (SBUX), Shake Shack (SHAK), Chipotle Mexican Grill (CMG), Domino's Pizza (DPZ) and Wendy's (WEN) with neutral ratings."Our favorable ratings skew towards names where we believe the market has unjustifiably penalized a company for decelerating (same-store sales) trends, execution missteps, and/or food safety effects, while minimizing its ability to restore momentum over time," Gonzalez said.Seaport highlighted four themes it expects to shape the sector. These include food safety and supply chain concentration; loyalty programs, artificial intelligence and a shift from digital breadth to depth; exposure to GLP-1 weight-loss drugs; and capital allocation, franchising and renewed activist investor pressure.Dutch Bros is leading the industry on "virtually every metric that matters," including unit growth, comparable sales, and store-level profitability. The company recorded robust results in the first half of the year, has "well-established" growth drivers and an "unparalleled" white space opportunity, despite a steep decline in its stock so far in 2026, according to the note.Cava has a substantial runway and an opportunity to define the Mediterranean fast-casual domain, while newer stores are generating comparable sales growth faster than system averages, Seaport said.The brokerage sees Restaurant Brands "as an underappreciated global growth story," based on momentum from its Burger King business in the US, while the slowdown at Tim Hortons is "addressable," it said.Yum Brands is on track to achieve its full-year algorithm of 5% unit growth, 7% system sales growth, and at least 8% core operating profit growth, Gonzalez wrote in the note.Darden's competitive advantages should position it to continue to gain share of the casual dining industry. The company has consistently met its 10% to 15% long-term shareholder return target since the coronavirus pandemic, with delivery, catering and faster unit growth offering further growth opportunities.Texas Roadhouse has gained traffic share for "the better part of two decades" and has increased units faster than any full-service peer of comparable scale, Gonzalez said.Price: $42.25, Change: $+0.27, Percent Change: +0.64%
