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5 Stocks to Buy as Restaurant Sales Bounce Back to Normal

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The restaurant industry seems to be finally getting back on its feet, with sales rebounding to the pre-pandemic levels as more people dine out. Also, people are shelling out more, with the new round of fiscal stimulus giving them more spending power.

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. Hiring too has been on the rise at restaurants and bars.

Restaurant Sales Bouncing Back

Sales at U.S. restaurants and bars reached $67.3 billion in May, increasing for the third month in a row, according to Census Bureau Statistics. The 1.8% jump in May sales is the highest since January 2020, when sales had reached $66.3 billion.

On a year-over-year basis, sales increased 70.6%. Last year, following the pandemic, sales declined more than 55% as the country went under lockdown, and restaurants and other businesses had to be shut down.

Also, people started spending more on essential goods that further hampered sales at restaurants and bars. Job losses due to the pandemic made people more cautious and robbed them of their spending power. That said, sales have been rebounding for the past three months, not only raising hopes but also indicating that the industry is finally rebounding.

The growth in restaurant sales comes despite a decline in overall retail sales but that is because people are lately spending more on services than goods.

Restaurant Industry Poised to Grow

People who had been avoiding restaurants and bars for fear of contracting the COVID-19 virus are finally showing more courage and confidence in stepping out, thanks to the massive vaccination drive.

Also, new cases of coronavirus infections are on the decline, leading the government to ease restrictions and reopen the economy faster than expected. This has led people to visit restaurants and bars, thus pushing sales once again.

Besides, the new round of stimulus checks from President Joe Biden’s $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.

Also, reopening of the restaurant industry has led to a hiring spree. In the coming days, as more get vaccinated and restrictions further ease, business will boom.

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.

Bloomin Brands, Inc. (BLMN - Free Report) is a casual dining restaurant company with a portfolio of differentiated restaurant concepts. It has five concepts: Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, Fleming's Prime Steakhouse and Wine Bar and Roy's.

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 78.3% over the past 60 days. The company sports a Zacks Rank #1.

Chuys Holdings, Inc. (CHUY - Free Report) 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 36.6% over the past 60 days. Chuys Holdings sports a Zacks Rank #1.

Dine Brands Global, Inc. (DIN - Free Report) is a full-service dining company. It operates and franchises restaurants under both the Applebee's Neighborhood Grill & Bar and IHOP brands. 

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 35.2% over the past 60 days. The company carries a Zacks Rank #1.

Texas Roadhouse, Inc. (TXRH - Free Report) is a full-service, casual dining restaurant chain, which offers assorted seasoned and aged steaks hand-cut daily on the premises and cooked to order over open gas-fired grills.

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 35.3% over the past 60 days. The company sports a Zacks Rank #1.

Ruths Hospitality Group, Inc. (RUTH - Free Report) 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 82.8% over the past 60 days. The company has a Zacks Rank #2.

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