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Restaurant Sales Roaring Back to Pre-Pandemic Levels: 5 Picks

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The restaurant industry is fast getting back on its feet as the economy continues to reopen. After taking a battering for over a year due to the pandemic, restaurant sales are again on the rise.

As more people are stepping out of their homes and planning holidays, hiring at restaurants are also on the rise. Restaurants and bars have once again started accounting for the majority of retail sales and the industry is likely to grow in the coming months.

Restaurant Sales Peak

According to the latest Mastercard SpendingPulse report, sales at restaurants and bars in the United States grew a whopping 55.1% in June on a year-over-year basis. The figures look impressive and there are reasons for it. The months of March and April 2020 saw restaurant sales coming to a standstill.

However, even as restaurants and bars started reopening around this time following the lockdown, sales remained quite low as people were wary of stepping outside.But as the economy started reopening further this year, sales picked up.

Sales are now higher than the pre-pandemic levels. June sales wereup 16.8% from 2019, which shows the rise in demand for restaurant food. Also, sales at restaurants and bars are driving overall retail sales. According to the latest Mastercard SpendingPulse report, retail sales jumped 11% year over year in June.

Restaurants Sales Poised to Grow

It is expected that restaurant  sales will further pick up in the coming months as people, who remained confined to their homes  for over a year are now more confident after taking the COVID-19 vaccine. Sales have been on the rise since the beginning of the year, when the vaccination drive started gathering steam.

Although retail sales declined in May, sales at bars and restaurants surprisingly gained.This is primarily because people have lately been spending less on goods and more on services.

Besides, the new round of stimulus checks as part of the $1.9 trillion coronavirus relief aid has given people more purchasing power. According to a Restaurant Business Online article, citing a report by the National Restaurant Association, U.S. restaurant sales are fast bouncing back to normal after declining 19.2% in 2020, which was also the most challenging year for the industry.

Our Choices

Given the situation, it makes good sense to invest in restaurant stocks. We have handpicked stocks of five restaurant players, each carrying a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ruths Hospitality Group, Inc. RUTH is the largest fine-dining steakhouse company in the United States as measured by the total number of company-owned and franchisee-owned restaurants, with over 150 Ruth's Chris Steak House locations worldwide.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 18.9% over the past 60 days. The company sports a Zacks Rank #1.

Papa John’s International, Inc. PZZA operates and franchises pizza delivery and carryout restaurants in the United States and other specific international markets. Its dine-in and delivery restaurants operate under the brand name Papa John’s.

The company’s expected earnings growth rate for the current year is 98.6%. The Zacks Consensus Estimate for current-year earnings has improved 7.3% over the past 60 days. Papa John’scarries a Zacks Rank #1.

Chuys Holdings, Inc. CHUY owns and operates full-service restaurants serving a distinct menu of authentic Mexican food. The company offers a menu that includes appetizers, soups and salads, tacos, burritos, enchiladas, fajitas and combination platters.

The company’s expected earnings growth rate for the current year is 82.1%. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the past 60 days. Chuys Holdings has a Zacks Rank #2.

The Wendys Company WEN operates through its subsidiary holding company — Wendy’s Restaurants, LLC. The fast-food chain through its subsidiary operates as a franchisor of the Wendy's restaurant system. 

The company’s expected earnings growth rate for the current year is 29.8%. The Zacks Consensus Estimate for current-year earnings has improved 7.2% over the past 60 days. The Wendys Company carries a Zacks Rank #2.

El Pollo Loco Holdings, Inc. LOCO through its subsidiary, develops, franchises, licenses and operates quick-service restaurants under the name El Pollo Loco.

The company’s expected earnings growth rate for the current year is 10.3%. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the past 60 days. El Pollo Loco carries a Zacks Rank #2.


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Ruths Hospitality Group, Inc. (RUTH) : Free Stock Analysis Report
 
The Wendys Company (WEN) : Free Stock Analysis Report
 
Papa Johns International, Inc. (PZZA) : Free Stock Analysis Report
 
Chuys Holdings, Inc. (CHUY) : Free Stock Analysis Report
 
El Pollo Loco Holdings, Inc. (LOCO) : Free Stock Analysis Report
 
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