Restaurant stocks experienced a decline in morning trading on Monday, primarily due to investor anxieties surrounding a potential recession.
U.S. stocks have seen a downturn for three straight days, spurred by President Donald Trump’s unexpected announcement of increased tariffs on imports from major trading partners. Analysts believe that while these tariffs may not directly impact most restaurant firms, the resultant inflation may strain consumer purchasing power and contribute to an economic slowdown.
UBS analyst Dennis Geiger remarked in a client note on Monday that while the immediate cost implications of tariffs for restaurants are manageable—primarily affecting certain commodity prices—the larger concern lies with the potential decrease in consumer spending and overall market demand.
The impact of investor apprehension was evident across various restaurant sectors.
Starbucks saw its shares drop over 3%, following a downgrade to neutral by Baird, which pointed to short-term economic challenges. The coffee giant has already been striving to revitalize its U.S. operations, with its stock plummeting nearly 20% since the announcement of the tariffs.
Bank of America Securities analyst Sara Senatore highlighted in a research note on Saturday that reasons for the downturn included rising coffee prices due to tariffs, anti-American sentiment, and recession fears.
The majority of the world’s coffee is cultivated in a climatic zone known as the Coffee Belt, which includes parts of Latin America, the Asia-Pacific, and Africa. The recent tariffs imposed by Trump affected crucial coffee exporters such as Vietnam, Brazil, and Switzerland, where coffee beans are roasted. Unlike other crops, coffee production cannot be easily relocated to the U.S. due to high domestic demand and specific climate needs.
Additionally, escalating trade tensions put Starbucks’ international revenue at risk, particularly in China, its second-largest market, where consumers have been known to boycott Western brands for political reasons.
Casual dining franchises also saw significant drops. Shares of Dine Brands, the parent company of Applebee’s and IHOP, fell nearly 3%, while competitors Darden Restaurants and Texas Roadhouse experienced declines of more than 2% and 3%, respectively.
Fast-casual chains, which have become a popular choice among investors, were not immune to the downtrend either. Chipotle’s shares decreased by nearly 2%, Sweetgreen’s stock slipped almost 1%, and Wingstop’s shares fell by 3%.
Fast-food stocks joined the downward trend as well. Morning trading saw declines for McDonald’s, Restaurant Brands International, and Yum Brands.
Historically, fast-food outlets tend to perform better during recessions, as diners looking for more affordable meals often shift from full-service or fast-casual restaurants to budget-friendly options like McDonald’s or Taco Bell. However, a decline in consumer expenditure last year severely affected fast-food establishments, with lower-income consumers visiting less frequently and high-income consumers maintaining their dining habits, resulting in lower same-store sales for quick-service restaurants.
Amid the market slump, only a few restaurant stocks managed to post gains. Shares of Dutch Bros, a rapidly expanding competitor of Starbucks, rose over 3% in morning trading, recovering from a nearly 10% decline experienced on Friday. Cava also gained more than 3%, while shares of Domino’s Pizza saw a slight increase.
