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Restaurant Sales Bouncing Back to Pre-Pandemic Highs: 5 Picks

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Restaurants and bars, which had taken a bad hit last year, are fast bouncing back to normal and driving overall retail sales. While retail sales have been on the decline over the past couple of months and recorded a marginal increase in June, sales at bars and restaurants are fast picking up.

In fact, sales are now higher than the pre-pandemic level highs and as the economy reopens further, the industry is expected to flourish.

Restaurant Sales Continue to Grow

Sales at restaurants and bars grew in June with consumers spending 2.3% higher in receipts, the Commerce Department said on Jul 16. On a year-over-year basis, sales at restaurants and bars surged a whopping 40.2% in June.

Compared to that, overall retail sales grew just 0.6% in June. Understandably, restaurants are again getting busy and attracting a higher footfall as more people are getting vaccinated and stepping out.

Last year, the service industry took a bad hit due to the pandemic, which saw people spending more on electronic and essential goods.

This is evident from slowing retail sales but rising spending at restaurants and bars. Restaurants and bars are the only services category that is reported as part of overall retail sales.

Also, a number of restaurants are reporting a surge in sales this quarter.

PepsiCo Inc. (PEP - Free Report) recently reported its fastest sales growth in a decade, as it benefited from consumers who are aggressively returning to restaurants, bars and stadiums after a one-year lull.

Restaurant Sales Poised to Grow

Sales at bars and restaurants have been on the rise since the beginning of the year, when the vaccination drive started gathering steam. So far, more than 160 million people have been vaccinated across the United States. This has seen the government easing restrictions and more people gathering confidence to step out of their homes.

Also, traveling is on the rise once again and people are planning holidays. Thus, restaurant sales are likely to get a further boost in the coming months.

Besides, the new round of stimulus checks as part of the $1.9 trillion coronavirus relief aid has given people more spending power. According to a Restaurant Business Onlinearticle, 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.

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 0.2% over the past 60 days. The company sports a Zacks Rank #1.

Papa John’s International, Inc. (PZZA - Free Report) 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 more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 5.6% over the past 60 days. Papa John’s carries 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 18.9% over the past 60 days. The company has a Zacks Rank #1.

The Cheesecake Factory Incorporated (CAKE - Free Report) operates 298 restaurants throughout the United States and Canada under brands, including The Cheesecake Factory and North Italia, and a collection within the Fox Restaurant Concepts subsidiary.

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 5.6% over the past 60 days. The company carries a Zacks Rank #1.

The Wendy’s Company (WEN - Free Report) 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 Wendy’s Company carries a Zacks Rank #2.

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