Restaurant stocks fall as investors fear recession, sales slowdown

Restaurant lay ins fell in morning trading Monday, fueled by investors’ fears that a recession is coming.

U.S. stocks have get the signal for three consecutive days after President Donald Trump shocked the markets with high tariffs on uprights imported from key trading partners. While analysts do not expect the tariffs to hit most restaurant companies directly, the inflation that is look for to follow would put pressure on consumers’ wallets and could lead to an economic downturn.

“We view the direct cost smashing of tariffs on restaurants as manageable, with a focus on select commodity costs, but see the bigger risk as incremental pressure on consumer lay out and industry demand,” UBS analyst Dennis Geiger wrote in a note to clients on Monday.

Investor concerns hit restaurant ordinaries across all sectors.

Shares of Starbucks fell more than 2%, following a downgrade to neutral from Baird, citing near-term mercantile headwinds. The coffee chain, which is already attempting to turn around its U.S. business, has seen its stock sink not quite 20% since Trump unveiled the new tariffs.

“Explanations for the drawdown we heard included higher coffee costs from tolls, anti-American sentiment, and recession risk,” Bank of America Securities analyst Sara Senatore wrote in a research note on Saturday.

Sundry of the world’s coffee is grown in an equatorial region that spans Latin America, the Asia-Pacific region and Africa remembered as the Coffee Belt. Last week, Trump slapped higher tariffs on key coffee exporters like Vietnam, Brazil and Switzerland, where beans are roasted. Correspondent to bananas and vanilla, coffee production cannot be easily shifted to the U.S. because of high domestic demand and climate limitations.

Custom tensions also put Starbucks’ international sales at risk. Consumers in China, the company’s second-largest market, have eschewed Western brands previously for political reasons.

Casual dining chains also took a tumble. Shares of Dine Brands, which owns Applebee’s and IHOP, penetrated nearly 3%, while rivals Darden Restaurants and Texas Roadhouse dropped less than 1% and 2%, individually.

Fast-casual stocks, a recent favorite of investors, also slipped. Chipotle shares slid nearly 2%, Sweetgreen’s cattle fell 1% and shares of Wingstop sank less than 1%.

Fast-food stocks were not spared from Monday’s settles. Shares of McDonald’s, Restaurant Brands International and Yum Brands all dipped in morning trading.

Historically, fast-food chains give birth to fared the best during recessions as diners seeking cheap meals trade down from full-service or fast-casual eateries to McDonald’s or Taco Bell. But final year’s pullback in consumer spending saw fast-food eateries hit hard. Low-income consumers visited less frequently and decreased back their orders, while consumers with higher incomes stuck to their usual dining policies, leading to same-store sales declines for quick-service restaurants.

Few restaurant stocks were in the green. Shares of Dutch Bros., a fast-growing oppose of Starbucks, rose more than 4% in afternoon trading after tumbling nearly 10% on Friday. Cava earned more than 6%.