Restaurants are competing for frugal diners’ dollars
Dining out is increasingly becoming a luxury for Americans feeling the pinch of inflation. For some restaurants, persuading customers to spend is proving difficult. Starbucks, for instance, reported a 3% decline in same-store sales for the latest quarter, its first drop since 2020, compared to a 12% increase the previous year. Sales fell 11% in China, Starbucks’ second-largest market, and the company has revised its full-year sales forecast downward.
Starbucks attributes the decline to more cautious consumer spending, with customers visiting less frequently and spending less per visit. “Many customers are now more selective about their spending, especially as pandemic-related savings are mostly depleted,” said Starbucks CEO Laxman Narasimhan during the company’s earnings call.
This trend reflects a broader pattern of consumers tightening their budgets amidst high interest rates, persistent inflation, and the exhaustion of pandemic-era savings. In response, companies are ramping up efforts to attract customers. Starbucks is introducing new options like sugar-free drink customizations, a zero-to-low-calorie energy drink, and updates to its mobile app to draw in new customers and encourage frequent purchases.
As food prices rise, Americans are opting to eat at home more often. In the March Consumer Price Index report, food prices at home remained steady, while dining out saw a 0.3% increase. This shift has impacted fast-food chains like McDonald’s, which reported a 1.9% growth in global same-store sales for the first quarter, a sharp decline from the previous year’s 12.6% increase. McDonald’s acknowledged that diners are becoming increasingly frustrated.
“Everyone is competing for a shrinking customer base or those who visit less frequently, so we need a determined approach to win them over,” said Ian Borden, McDonald’s global CFO.
Lower-income consumers are also cutting back. Darden Restaurants, which owns Olive Garden, reported a drop in same-restaurant sales in its latest quarter, with reduced spending from households earning below $75,000. Every brand in Darden’s portfolio saw a decline in transactions from households earning under $50,000. “Lower-income consumers are definitely scaling back,” noted Darden CEO Ricardo Cardenas. However, higher-income customers continue to spend, with Darden seeing increased sales from households earning above $150,000.
**American Oil Tycoon Accused of Price-Fixing Conspiracy**
Scott Sheffield, founder and former CEO of Pioneer Natural Resources, is accused of attempting to conspire with OPEC to manipulate oil prices, according to federal regulators. The Federal Trade Commission alleges that Sheffield exchanged numerous messages about pricing and production with OPEC officials. Sheffield reportedly used WhatsApp, face-to-face meetings, and public statements to coordinate oil production in Texas with OPEC and OPEC+, a broader group including Russia.
The FTC claims Sheffield aimed to enhance Pioneer’s profits and those of OPEC and OPEC+ member states at the expense of U.S. consumers and businesses. Unlike OPEC nations, U.S. oil production should be governed by market forces rather than collusion among major players.
**What to Expect in Friday’s Jobs Report**
The U.S. job market has been robust over the past three years, with some economists describing it as the strongest in recent history. This positive trend is expected to continue in Friday’s April jobs report, though there might be a slight softening compared to the strong first-quarter gains. “Prolonged high interest rates are gradually squeezing the economy,” says Julia Pollak, chief economist at ZipRecruiter. “We expect a steady, orderly slowdown in the labor market until rates decrease.”
So far this year, the economy has added an average of 276,000 jobs per month, according to Bureau of Labor Statistics data. This is an increase from last year’s average of 251,000 jobs per month and significantly higher than the 165,000 monthly average in 2019.
Economists forecast that April’s report will show 232,500 new jobs, down from March’s estimated 303,000. The unemployment rate is expected to remain at 3.8%. If these predictions are accurate, it will mark the 40th consecutive month of job growth (the fifth-longest streak on record) and the 27th month in a row with a jobless rate below 4%, matching a streak from 1967 to 1970.
Dining out is increasingly becoming a luxury for Americans feeling the pinch of inflation. For some restaurants, persuading customers to spend is proving difficult. Starbucks, for instance, reported a 3% decline in same-store sales for the latest quarter, its first drop since 2020, compared to a 12% increase the previous year. Sales fell 11% in…