There's a classic comedy bit that begins with the line "waiter, there's a fly in my soup."
The setup ignites an entire subspecies of smart alecky responses, including "don't worry, I'll get you a fork," and "keep your voice down or the other customers will want one, too."
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However, a recent survey suggests that for a lot people, eating out at a restaurant isn't on the menu because rising prices are no joke.
The Vericast 2024 Restaurant Survey found that two-thirds (67%) of the respondents said that increased costs are making restaurant dining too expensive. That's up from 64% last year.
While both grocery and restaurant prices continue to rise even as overall inflation slows, the study said that restaurant prices are climbing at a much higher rate than groceries – 5.1% annually compared with 1.2%.
Sixty-eight percent of the survey respondents are trading down from restaurant meals to food from the grocery store to avoid the rising costs, with more than 71% of Gen Z and millennials doing that very thing.
Columnist notes 'vibrant sales report'
“The steadily increasing cost of dining out is testing the limits of what consumers can and will spend,” Dana Baggett, executive director of the Restaurant Division at Vericast, said in a statement. “There’s a noticeable decrease in consumers dining out, especially with consumers that have a household income under $75,000.”
Baggett said that many diners were choosing to eat out less, traded down to less expensive restaurants, ordered less or opted to eat out for more affordable mealtimes like breakfast or snacks.
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"As consumers are intentionally spending less at restaurants, acquiring new guests should be a key area of focus for restaurant brands," she said.
The news is not good for the restaurants, of course, but it does offer glad tidings for companies in the grocery business — like Costco (COST) .
The warehouse club's members pay $60 a year for a basic Gold membership or $120 for an Executive membership, the latter coming with 2% cash back up to $1,000.
The Issaquah, Wash., company, which operates 876 warehouses, including 604 in the U.S. and Puerto Rico, reported April sales results on Wednesday.
Costco posted net sales of $19.8 billion for April, up 7.1% from $18.48 billion in the year-earlier period. Net sales for the fiscal 35 weeks were $166.44 billion, up 7% from $155.62 billion a year earlier.
The company said the results were hurt by the shift in the timing of Easter, which cut into total and comparable sales by a little more than 0.5%.
TheStreet Pro’s Chris Versace cited the Vericast report, saying it "helps explain Costco’s vibrant April sales report" and led him to raise his price target on Costco to $830 from $800.
"Costco’s April retail sales report is out, and it was another strong one for the company, he said. "It’s safe to say that May-quarter consensus revenue forecast will now need to be adjusted higher."
Analyst: Costco performance 'remains solid'
Analysts responded to Costco's monthly sales report by adjusting their stock-price targets.
Deutsche Bank, which has a buy rating and an $830 price target on the company, said that "despite recent consumer volatility, COST’s performance remains very solid."
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The investment firm said that performance was driven by the Northeast, Southeast, and Midwest for the U.S., and by Mexico, Australia, and South Korea internationally.
Loop Capital analysts raised the firm's price target on Costco to $840 from $820 and affirmed a buy rating on the shares after reviewing the company's April sales data.
The firm said it was reducing its comparables estimates slightly for the rest of the company's fiscal year as inflation continues to pressure consumers. Still, Costco's e-commerce business grew a strong 15% as it continues to tout its selection and works to improve an outdated consumer interface, the investment firm said.
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JP Morgan raised the firm's price target on Costco to $804 from $761 and reiterated an overweight rating on the shares.
The company's April U.S. core comparable number was in line with estimates led by strong traffic, the analyst tells investors in a research note.
Costco is scheduled to report fiscal-third-quarter earnings on May 30.
In March, the company posted second-quarter earnings of $3.92 a share, beating the LSEG consensus of $3.62.
Revenue totaled $58.44 billion compared with Wall Street’s call for $59.16 billion in sales. Membership fee revenue totaled $1.11 billion, up 8.2% year-over-year in the quarter.
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