Eating in is the new dining out.
Consumers have been whipping up dinner at home instead of going to fast-food joints and other restaurants to the detriment of the eateries but to the benefit of grocery stores, the Associated Press reported.
Inflation has fallen from its pandemic highs over the past year, but it's been easing more for items on grocery store shelves since the middle of the year, the AP reported, reversing a trend seen over the past several years.
The change has left McDonald's, Olive Garden owner Darden Restaurants, and other restaurant chains worried about their bottom lines.
Darden, based in Orlando, reported a 1.1% decrease in sales at restaurants open for at least a year.
At the Olive Garden chain, sales plummeted 2.9%, the report said.
McDonald's recorded a 1.1% drop in the same sales category during its second quarter after seeing a 11.7% jump the previous year.
"You are seeing consumers being much more discretionary as they treat restaurants," McDonald's CEO Christopher J. Kempczinski said in a call with analysts after an earnings report, the AP said.
"You're seeing that the consumer is eating at home more often. You're seeing more deal seeking from the consumer," he added.
But the dining-at-home trend has been a boon for companies like General Mills, maker of Cheerios cereal, Progresso soups and Haagen-Dazs ice cream.
"We did anticipate that might be the case as we see consumers taking value," General Mills CEO Jeffrey L. Harmening said in a call with analysts, the AP reported. "Consumers are still economically stressed, so that played out the way we thought."
Food companies like General Mills had hiked their prices to counter rising inflation costs, which resulted in profit margin increases. But now, the AP said, they are reducing those prices with budget-conscious consumers in mind.
Kroger reported a 1.2% rise in sales at stores open at least a year in its latest quarter. Wall Street anticipated that measure to increase to 1.8% in the current quarter for Kroger and 2.1% for the final quarter of its fiscal year.
"We are cautiously optimistic about our sales outlook for the second half of the year and expect customers to continue prioritizing food and essentials," Kroger CEO Rodney McMullen said, the AP reported.
