Industry Overview - The Zacks Retail – Restaurants industry is facing challenges due to a tough macroeconomic environment, high costs, and declining traffic, making it difficult for restaurants to maintain margins as labor and food costs fluctuate unpredictably [1][4] - Despite these challenges, the industry is benefiting from partnerships with delivery channels and digital platforms, which are expected to drive growth [1][6] Current Trends - U.S. restaurant visits are declining as consumers prioritize essential spending over dining out, particularly affecting lower and middle-income households [3] - Elevated labor costs and volatile food input costs are compressing margins, forcing operators to absorb higher costs and resulting in tighter margins and slower earnings growth [4] - Many restaurant chains are increasing promotions and discounts to defend traffic, which may stabilize short-term sales but could dilute average checks and pressure margins [5] Growth Drivers - Digital innovation and partnerships with delivery services like DoorDash and Uber Eats are crucial for driving incremental sales [6] - The rise in off-premise sales, including delivery and takeout, is acting as a key catalyst for the industry, with many operators testing ghost kitchens and enhancing curbside services [7] Industry Performance - The Zacks Restaurant industry is ranked 210, placing it in the bottom 14% of over 244 Zacks industries, indicating dull near-term prospects [8] - Over the past year, the industry has underperformed the S&P 500, declining 3.2% compared to the S&P 500's rise of 13.6% [10] Valuation Metrics - The industry is currently trading at a forward 12-month P/E of 24.46X, which is higher than the S&P 500's 22.81X but below the sector's 25.05X [13] Company Highlights - **Brinker International, Inc. (EAT)**: The company is benefiting from increased menu pricing and effective marketing strategies, with anticipated sales and earnings growth of 6.5% and 15.1% respectively for fiscal 2026 [16][17] - **BJ's Restaurants, Inc. (BJRI)**: The company is focused on growing traffic and enhancing operational efficiency, with expected sales and earnings growth of 2.4% and 3.3% respectively for 2026 [20][21] - **Chipotle Mexican Grill, Inc. (CMG)**: The company is reinforcing long-term growth through high-quality ingredients and digital innovation, although it has seen a decline of 29.3% in shares over the past year, with projected sales and earnings growth of 9.4% and 3.4% respectively for 2026 [24][25]

Industry Overview - The Zacks Retail – Restaurants industry is facing a challenging macroeconomic environment characterized by high costs and declining traffic, but is experiencing sales growth due to menu price hikes and average check growth [1][3] - Industry participants are leveraging partnerships with delivery channels and digital platforms to enhance sales [1] Sales Performance - Restaurant sales showed strong momentum, with U.S. Census Bureau data indicating $98.7 billion in seasonally adjusted sales in June, a 0.6% increase from May's revised total of $98.2 billion [4] Digital Innovation - The focus on digital innovation and partnerships with delivery services like DoorDash and Grubhub is driving incremental sales for restaurant operators [5] Off-Premise Sales - The increase in off-premise sales, including delivery and takeout, is acting as a key catalyst for growth, with many operators testing ghost kitchens and connected curbside services [6] Industry Ranking - The Zacks Restaurant industry holds a Zacks Industry Rank of 188, placing it in the bottom 23% of over 244 Zacks industries, indicating dull near-term prospects [7][8] Stock Performance - Over the past year, the industry has underperformed the Zacks S&P 500 Composite, growing only 5.7% compared to the S&P 500's 20.3% and the sector's 25.7% [9] Valuation Metrics - The industry is currently trading at a forward 12-month P/E of 24.69X, higher than the S&P 500's 22.69X but below the sector's 25.05X [12] Company Highlights - **BJ's Restaurants**: Achieved 2.9% year-over-year comparable sales growth in Q2 2025, driven by a 3.3% increase in traffic, with anticipated sales and earnings growth of 3.2% and 38.8% respectively for 2025 [14][15] - **The Cheesecake Factory**: Benefiting from higher consumer demand and operational efficiency, with expected sales and earnings growth of 5.1% and 9.3% respectively for 2025 [18][19] - **Cracker Barrel**: Focused on menu innovation and digital initiatives, with anticipated sales growth of 0.1% but a decline in earnings of 9.1% for 2025 [22][23]