After a sluggish summer, sales at fast-food chains have started to gain momentum, according to an analyst report Monday.
Larry Miller of RBC Capital Markets Corp. said in the report that same-store sales trends within quick-service channels were up 1 percent in August and 2 percent in September, with positive trends continuing into October.
In addition, he said a poll of consumers in late August showed the first year-over-year increase in their plans to spend at quick-service restaurants in more than five quarters.
Aside from burger giant McDonald's, many quick-service chains struggled with flat or negative same-store sales trends throughout the summer.
Miller said an improving outlook for the quick-service segment will most likely benefit “weaker players” like San Diego-based Jack in the Box Inc. and Oklahoma City-based Sonic Corp., which are expected to report more favorable comparisons over the next 12 months, Miller wrote. Both chains are showing stable- to improved two-year trends, he noted.
“At minimum, the easy comparisons allow more time for U.S. employment to pick up, which would boost fast-food sales trends further,” he wrote.
At a recent investor conference, Jack in the Box said its fourth-quarter same-store sales were slightly ahead of its projection of a 4.5-percent to 5.5-percent decline. In the company’s July 4-ended third quarter, same-store sales for corporate stores were down 9.4 percent, compared with a decline of 1.0 percent for the same quarter a year ago.
Sonic said last month that fourth-quarter same-sales declined 6.4 percent, compared with a year-ago drop of 4.5 percent, which Miller described as a modest increase in the two-year trend. Sonic, which reports full fourth-quarter results on Tuesday, also noted that its corporate drive-ins outperformed the system for the first time in nearly three years in the Aug. 31-ended period.
Miller raised his outlook for Jack in the Box and Sonic early Monday, which helped boost the stock prices of both companies.
Shares of Jack in the Box closed at $24.02, up 3.2 percent. Over the past 52 weeks, the company's stock price has ranged from $17.84 to $26.37.
Meanwhile, Sonic's stock price rose 4.5 percent to close at $9.67 on Monday. Over the past 52 weeks, the company's shares have traded between $7.28 and $13.11.
Contact Lisa Jennings at [email protected].
