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4 Restaurant Stocks to Buy on Surging Sales and Hiring

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Americans are worried about rising prices, but that hasn’t stopped them from spending. In fact, people have started spending aggressively on services, helping retailers. This has seen U.S. restaurants, which had taken a major hit during the peak of the pandemic, finally bouncing back to normal.

Latest data from the Commerce Department shows that sales at bars and restaurants increased in March despite people feeling the pinch in their pockets. This definitely is a good sign given that the restaurant industry has suffered a lot over the past couple of years. Thus, stocks like Dave & Buster's Entertainment, Inc. (PLAY - Free Report) , BBQ Holdings, Inc. (BBQ - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Kura Sushi USA, Inc. (KRUS - Free Report) are likely to benefit in the near term.

Restaurant Sales Rise

The Commerce Department said on Apr 14 that restaurant sales grew 1% in March. The report comes as part of the overall retail sales that rose 0.5% month over month in March.

Rising costs have been worrying people and they have been spending cautiously. However, that hasn’t stopped them from spending on services like restaurants. This definitely is a good sign, given that the restaurant industry has had an unimpressive journey since the onset of the pandemic.

People cut back on their spending on services during the pandemic, opting instead to spend more on goods. Because of the COVID-induced lockdown, they didn't have much of an option in terms of spending on services.

However, things finally seem to be changing as more people are confident now about stepping out of their homes and indulging in outdoor entertainment. This is because COVID-related restrictions continue getting eased.

Industry on Track for Steady Growth

The restaurant industry seems to be on track for a speedy recovery, although rising costs remain a major challenge. A separate Mastercard SpendingPulse report shows sales at restaurants and bars in the United States increased 19.1% in March on a year-over-year basis.

According to the National Restaurant Association, restaurant sales in 2022 will be significantly higher than in 2021. According to the estimate, restaurant sales will reach $898 billion in 2022, returning to pre-pandemic levels.

Rising sales have also seen restaurants going on a hiring spree. Hiring in the United States is already on a high, with the 431,000 jobs added in March. Restaurants and bars led the race with 61,000 job additions.

Moreover, the foodservice industry is expected to add 400,000 employment to its current 14.9 million employees by 2022. The situation appears much better than it was a year ago, and if things continue to improve, the restaurant business will only continue to expand.

This means the willingness of people to dine out has also given restaurants the much-needed encouragement to hire more workers.

Our Choices

Dave & Buster's Entertainment, Inc. is a leading owner and operator of high-volume venues in North America that combine dining and entertainment for both adults and families. The core concept of PLAY’s chain is “Eat Drink Play and Watch,” all in one location. Under the Eat concept, Dave & Buster's Entertainment offers a wide variety of starters, burgers, choice-grade steaks and health-conscious food.

Dave & Buster's Entertainment’s expected earnings growth rate for the current year is 49.3%. The Zacks Consensus Estimate for current-year earnings has improved 22.2% over the past 60 days. PLAY sports a Zacks Rank #1.

BBQ Holdings, Inc. operates and franchises barbeque restaurants and blues clubs. BBQ currently owns locations and franchises in Minnesota, Wisconsin, Illinois, Iowa, Nebraska, Utah, Maryland and Virginia and has signed development agreements for additional franchised locations. BBQ Holdings’ menu features award-winning barbecued and grilled meats, an ample selection of salads, side items, sandwiches and unique desserts.

BBQ Holdings’ expected earnings growth rate for the current year is 66.2%. The Zacks Consensus Estimate for current-year earnings has improved 25.5% over the past 60 days. BBQ sports a Zacks Rank #1.

Arcos Dorados Holdings Inc. operates as a franchisee of McDonald's, with its operations divided in Brazil; North Latin America division; South Latin America and the Caribbean division. ARCO also runs quick-service restaurants in Latin America and the Caribbean.

Arcos Dorados’ expected earnings growth rate for the current year is 66.7%. The Zacks Consensus Estimate for current-year earnings has improved 17.6% over the past 60 days. ARCO has a Zacks Rank #2.

Kura Sushi USA, Inc. operates as a restaurant. KRUS offers nigiri, roll, hand roll, gunkan and desserts. Kura Sushi is based in Irvine, CA.

Kura Sushi USA’s expected earnings growth rate for the current year is 81.9%. Shares of KRUS have gained 22.5% in the past three months. Kura Sushi USA has a Zacks Rank #2.