U.S. retail sales have cooled amid higher prices partly linked to tariffs, yet dining-out remains resilient: food services and drinking places totaled $88.5 billion in September, up 0.7% month-on-month and 5.7% year-on-year. Two 25-basis-point Fed cuts in September and October, markets pricing an 87.6% chance of another 25-bp cut in December, and the holiday season underpin a favorable near-term demand backdrop for restaurants. Zacks spots three beneficiaries with recent upward earnings revisions—Yum China Holdings (YUMC; current-year EPS growth est. 11.3%, consensus +1.7% over 90 days, Zacks Rank #3), BJ’s Restaurants (BJRI; est. +49%, consensus +0.9% over 60 days, Rank #3) and El Pollo Loco (LOCO; est. +6.7%, consensus +3.2% over 60 days, Rank #1)—as potential plays on continued dining-out strength.
U.S. retail sales slowed in September — overall retail rose just 0.2% month-over-month after a 1.0% jump in August — while food services and drinking places recorded $88.5 billion in September, up 0.7% sequentially and 5.7% year-over-year, making restaurant sales the only services component to show notable strength. The article attributes part of the broader retail slowdown and persistent inflation to President Donald Trump’s tariffs, yet notes consumers continue to spend on dining out, supporting restaurants through the early holiday season. Monetary conditions have become more accommodative: the Federal Reserve cut rates by 25 basis points in both September and October, and the CME FedWatch Tool prices an 87.6% chance of an additional 25-basis-point cut in December; Zacks argues this rate relief combined with seasonal demand should benefit restaurant traffic. The piece highlights the resilience of dining demand despite inflationary pressures and labor market concerns, identifying a favorable near-term demand and rate backdrop for the restaurant subsector. Zacks names three restaurant stocks with recent upward earnings revisions as potential beneficiaries: Yum China Holdings (YUMC) with a current-year EPS growth estimate of 11.3% and a +1.7% 90-day revision (Zacks Rank #3), BJ’s Restaurants (BJRI) with a 49% estimate and +0.9% 60-day revision (Rank #3), and El Pollo Loco (LOCO) with a 6.7% estimate and +3.2% 60-day revision (Rank #1). The article specifically recommends favoring restaurant operators with strong online/order-ahead capabilities as a structural advantage during cautious consumer spending periods.
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