These Middle America brands are struggling in the street fight over consumers
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Several major brands that target working-class and middle-income Americans are struggling to attract customers.
Why it matters: While much of the market's attention is focused on the booming AI economy, there's a street fight going on among some of the biggest brands for the wallets of value-conscious consumers.
Zoom in: Signs of trouble are emerging for multiple major players:
- Papa John's shares plummeted Thursday after the chain reported an 8.3% decline in sales at its North American restaurants open at least a year, telling analysts the company must meet the customer "where they are in this challenged environment."
- Popeyes Louisiana Kitchen recorded a 5.2% drop in comparable sales at its U.S. locations, and vowed going forward to focus on offering "consistent, easy-to-understand value."
- Budget gym chain Planet Fitness posted a 1.7% slump in the same metric at its clubs, and talked about "reinforcing affordability" to reignite member growth.
- Six Flags Entertainment reported a 4% drop in same-park attendance at its amusement parks, though it argued it sees opportunities to expand with consumers "whatever side of the K they might be coming from."
Threat level: While consumer spending has been strong overall in recent months, Mastercard chief business officer Sachin Mehra noted on an earnings call last week that a portion of it "has come on account of higher fuel prices" and the one-time effect of the World Cup.
- Those elevated gas prices — which are fueling rock-bottom consumer sentiment — are putting pressure on household budgets, forcing brands to compete harder for discretionary dollars.
Yes, but: Some companies that target low- and middle-income consumers are doing just fine.
- Burger King — which, like Popeyes, is owned by Restaurant Brands International — enjoyed a buoyant quarter with an 8.5% increase in U.S. comparable sales.
- The chain's marketing and product investments are paying off, helping it gain momentum against arch-rival McDonald's, which posted a disappointing 0.8% increase in U.S. comparable sales as it failed to execute on its value strategy.
- Keurig Dr. Pepper CEO Timothy Cofer said Thursday on an earnings call that consumers are "responding" to the company's "compelling value proposition."
The bottom line: Consumers haven't stopped spending. They're just becoming much more selective about where they do it.
