Sales at U.S. bars and restaurants have been growing steadily since the beginning of the year. The industry suffered a lot during the peak of the pandemic, with sales nosediving. The struggle continued till last year before making a solid turnaround.

The trend has since continued and even rising costs and inflationary pressures haven’t impacted sales much. In fact, higher demand has been driving sales almost every month. Given this situation, stocks like BJ’s Restaurants, Inc. BJRI, Arcos Dorados Holdings Inc. ARCO, Chuy’s Holdings, Inc. CHUY, McDonald’s Corporation MCD and Dave & Buster’s Entertainment, Inc. PLAY are likely to benefit in the near term.

Restaurant Sales Jump

Sales as U.S. bars and restaurants totaled $88.9 billion in June, matching the adjusted sales figures of the previous month. On a year-over-year basis, restaurant sales increased a solid 8.4% in June.

The retail sector has been struggling for months as inflationary pressures continue to hamper sales. Despite that, sales have continued to grow and the restaurant industry has been largely responsible for boosting sales. Although higher prices have made consumers spend cautiously over the past year, they have been shelling out lavishly at restaurants, which bodes well for the industry.

In the retail sector, the Zacks Defined Restaurant Industry is presently ranked in the upper 15% among all industries, boasting a year-to-date return of 8.9%.

Industry Poised to Grow

Multiple factors are driving sales in the restaurant industry. This can be attributed to core aspects such as changes in operational procedures, workforce, layout designs and technological advancements.

Restaurant owners are also focusing on digital advancements, strategies to boost sales and cost-saving endeavors. The increasing impact of the Internet has made digital innovation crucial. Prominent restaurant chains are consistently collaborating with delivery services and digital platforms to generate additional sales.

Besides, inflation has also declined over the past 12 months. Although the Consumer Price Index (CPI) increased a modest 0.2% in July, inflation has sharply declined from its peak of 9.1% in June 2022.

Cooling inflation has raised hopes that the Fed might soon end its interest rate hike campaign. This is likely to further help the restaurant industry, as lower interest rates will allow people to spend more.

Our Choices

Given this situation, it would be ideal to invest in these five restaurant stocks.

BJ’s Restaurants, Inc. owns and operates a chain of high-end casual dining restaurants in the United States. BJRI’s menu offers a wide range of dining options, including everyday lunch and dinner, special occasions and late-night business.

BJ’s Restaurants’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 22.9% over the past 60 days. Presently, BJRI has a Zacks Rank #1 (Strong Buy).

Arcos Dorados Holdings Inc. operates as a franchisee of McDonald’s, with its operations divided in Brazil, the North Latin America division, South Latin America and the Caribbean division. ARCO also runs quick-service restaurants in Latin America and the Caribbean.

Arcos Dorados’ expected earnings growth rate for the current year is more than 11.6%. The Zacks Consensus Estimate for current-year earnings has improved 6.9% over the past 60 days. Currently, ARCO has a Zacks Rank #2.

Chuy’s Holdings, Inc. owns and operates full-service restaurants serving a distinct menu of authentic Mexican food. CHUY offers a menu that includes appetizers, soups and salads, tacos, burritos, enchiladas, fajitas and combination platters. Chuy’s Holdings operates chains throughout Texas, Alabama, Indiana, Kentucky and Tennessee. Chuy’s Holdings, Inc. is headquartered in Austin, TX.

Chuy’s Holdings’ expected earnings growth rate for the current year is 32.9%. The Zacks Consensus Estimate for current-year earnings has improved 4.6% over the past 60 days. CHUY presently carries a Zacks Rank #2.

McDonald’s Corporation is a leading fast-food chain that currently operates more than 39,000 restaurants in more than 100 countries. MCD mainly operates and franchises quick-service restaurants under the McDonald’s brand. Nearly 93% of McDonald’srestaurants worldwide are owned and operated by independent local businessmen as well as women.

McDonald’s expected earnings growth rate for the current year is 13.8%. The Zacks Consensus Estimate for current-year earnings has improved more than 4.1% over the past 60 days. MCD currently has a Zacks Rank #2.

Dave & Buster’s Entertainment, Inc. is a leading owner and operator of high-volume venues in North America that combine dining and entertainment for both adults and families. As of May 1, 2022, PLAY owned and operated 145 stores in 41 states, Puerto Rico and one Canadian province.

Dave & Buster’s Entertainment’s expected earnings growth rate for the current year is 29%. The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the past 60 days. PLAY has a Zacks Rank #1.
BJ’s Restaurants, Inc. (BJRI): Free Stock Analysis Report

McDonald’s Corporation (MCD): Free Stock Analysis Report

Chuy’s Holdings, Inc. (CHUY): Free Stock Analysis Report

Arcos Dorados Holdings Inc. (ARCO): Free Stock Analysis Report

Dave & Buster’s Entertainment, Inc. (PLAY): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

This article originally appeared on Zacks

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.