A family’s stimulus check from the U.S. Department of the Treasury for Coronavirus Aid (Covid-19) was received at the Post Office in Milton, Massachusetts, USA on March 25, 2021.
Brian Snyder | Reuters
Dominos pizza and MC Donalds Both reported that government economic reviews improved their first quarter results, but the two companies disagree on the longer-term effects of adding extra cash in consumer wallets.
In late December, just before the start of the first quarter, the federal government began sending out the second round of Covid stimulus checks worth up to $ 600 to eligible persons. A third round of checks for up to $ 1,400 for Qualified Individuals was sent out in late March. The IRS still sends stimulus checks to taxpayers whose payments never arrived or were too low.
Restaurant companies, starting with the Outback Steakhouse owner Bloomin ‘brands to Taco Bell parents Yum Brands, cited the checks as a factor in their first quarter sales growth. A report by Rabobank and Earnest Research estimated that consumers spent 10 to 15% more money in restaurants in the four weeks following the first two stimulus checks. However, it is still unclear whether the payments will actually kickstart the economy or just a temporary boost in restaurant spending that will dissipate.
Domino presented a possible theory.
“We are certainly still – you know, not just at Domino, but in the entire economy – still a bit affected by the wave of government incentives,” Dominos CEO Ritch Allison told analysts on Thursday.
The pizza chain told investors that the higher sales due to the stimulus checks caused the company to refrain from aggressive Boost Week promotions during the quarter. Even without the promotions, Domino’s US sales grew 13.4% in the same store.
McDonald’s, on the other hand, downplayed the impact of the checks. CEO Chris Kempczinski told analysts Thursday that there is no question that they will benefit the business, however The chain’s sales growth of 13.6% in the same store in the quarter was “way beyond” just the checks. McDonald’s attributed strong performance in the US to other corporate initiatives, such as promotions around celebrity favorite orders, the launch of its Crispy Chicken Sandwich, and higher digital sales.
“I think you can argue that stimulus checks are generally on the wane now, but we are seeing continued momentum in our business,” said Kempczinski.
Kevin Ozan, CFO of McDonald’s, said the U.S. consumer is still pretty healthy and ready to return to the chain’s dining rooms when it reopens.
“I don’t think we have much concern right now about the ability of consumers to spend money,” said Ozan.
Like the rest of the fast food sector, US sales of McDonald’s in the US have recovered quickly Coronavirus pandemicand attracts consumers with its convenient drive-through lanes and affordable prices. Domino’s has seen increasing demand during the crisis, which has raised concerns possible pizza fatigue when the pandemic subsides.
McDonald’s stocks rose more than 1% in afternoon trading after the company beat Wall Street estimates for earnings and sales and raised its full-year outlook for system-wide sales. At $ 180 billion, its market value is more than ten times that of Domino. Pizza chain stocks rose nearly 3% in afternoon trading after reporting mixed results for the first quarter.