Why Consumers Are Abandoning Chipotle, Sweetgreen and Cava

Core Insights - The consumer discretionary sector of the S&P 500 has experienced a loss of 0.02% over the past three months, marking it as the fourth-worst performing sector among the index's 11 sectors [2] - Fast-casual restaurants, including Chipotle Mexican Grill, Sweetgreen, and Cava, have seen significant stock declines over the past year, with losses of 48%, 82%, and 60% respectively [2][6] - The decline in the sector is attributed to persistent inflation, changing consumer sentiment, and a softening labor market, leading to reduced consumer confidence and strained household budgets [3][4] Company Performance - Chipotle reported Q3 earnings on October 29, with earnings per share (EPS) of 29 cents, meeting analyst expectations, but revenue of $3 billion fell short of forecasts [4] - Sweetgreen's Q3 earnings on November 7 showed an EPS of -31 cents, missing analyst expectations of -18 cents, along with revenue that also fell short [5] - Cava reported similar earnings misses in its Q3 results on November 4, indicating a trend of underperformance among fast-casual restaurants [5][6] Market Conditions - The consumer discretionary sector is facing challenges due to consumers opting for more budget-friendly dining options as confidence wanes [6] - The overall market recovery since April has not significantly improved the outlook for fast-casual restaurants, which continue to struggle with sales and earnings misses [3][4]