Tue, 28 Jan 2025

Restaurants are rebounding — but Starbucks and McDonald's still have work to do

Starbucks and McDonald's could disappoint investors, but investors are expecting better performance from the restaurant industry.
Starbucks is expected to report its quarterly earnings on Tuesday, marking the beginning of several weeks of earnings reports from restaurant companies. Investors are optimistic about improving demand for dining out after a few restaurants reported improved sales trends earlier this month. Red Robin and Noodles & Company saw their sales improve during the fourth quarter, while California Pizza Kitchen had a strong quarter and is already showing strong numbers in 2025. Darden Restaurants, which operates LongHorn Steakhouse and Olive Garden, also reported stronger-than-expected demand for its food during the quarter ended November 24. However, some of the biggest restaurant names may have disappointing quarters. Starbucks is still in turnaround mode under new CEO Brian Niccol, who has implemented operational changes that are expected to put pressure on margins in the first quarter. McDonald's spent much of its fourth quarter handling a foodborne illness crisis, which weighed on sales. Despite these challenges, restaurant executives seem more positive about 2025, citing improving consumer sentiment and wage growth. They will face easier comparisons to last year's sales slump, making their growth this year look more impressive. Investors will be listening carefully for executive commentary about how traffic and sales are faring so far in the first quarter. Restaurants have had to contend with wildfires that ravaged Los Angeles and seasonal snowstorms that kept diners at home.
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