Fast food sales decline in January: will 2025 be a tough year for QSR?

LA wildfires and freezing temperatures resulted in pressure on fast-food sales in January, according to data from Revenue Management Solutions.

A 3.4% year-on-year increase in fast-food sales last month was much weaker than the 4.9% observed in December.

While the weakness may persist throughout the first quarter, quick service restaurants (QSR) are convinced things will pick up in the back half of 2025.

The Invesco QQQ Trust, Series 1 – an exchange-traded fund (ETF) that tracks the US QSR sector is currently up more than 5% versus the start of this year.

Consumer caution is also hurting fast-food sales

Another reason that weighed on fast-food sales last month was the US consumer keeping cautious under the Trump administration.

“They’re waiting to see how the economy goes, but they’re also not willing to sacrifice that quality and the quantity of what they’re eating. They want to find best value for the dollar they spend,” Doug Fry – the US President of Subway told CNBC in a recent interview.

Quick service restaurants, including Chipotle and McDonald’s, have so far downplayed the potential impact of new tariffs that many believe could eventually trigger an all-out trade war.

However, consumers are concerned that Trump tariffs will lead to higher prices and increased pressure on their wallets.

In January, inflation was up a more-than-expected 3.0%, making US consumer sentiment slide further to a seven-month low in February.

QSR to see easier comparison in H2

Following what has been a weak start to 2025, the QSR sector is broadly expected to see an improvement in the second half of this year, primarily due to easier comparisons.

Footfall at fast-food restaurants was down in every month of last year except November.

Plus, if the consumer turned more confident as the year progresses, the uptick in sales will likely be even more pronounced, as per McDonald’s chief of finance Ian Borden.

McDonald’s stock has gained about 10% since mid-January.

Does Starbucks see improvement ahead too?

Even Starbucks which has struggled with comparable sales decline for four quarters expects signs of improvement to show up in the back half of its current financial year.

The world’s largest chain of coffeehouses has suspended guidance for its fiscal 2025, but Rachel Ruggeri – its chief of finance did talk of a pick-up in the second half on the most recent earnings call.

“EPS is expected to be the lowest in fiscal Q2 on an absolute basis due to seasonality, organisation restructuring, and elevated investments with YoY pressure also intensifying in the quarter,” she told investors at the time.

Wall Street currently has a consensus “overweight” rating on Starbucks stock.