UBS says US restaurant stocks positioned for better second half

Investing.com - UBS says US restaurant management teams sound more optimistic than investors heading into the second half of 2026, though the firm expects only modest traffic recovery ahead. The investment bank hosted discussions with investors and management teams in recent weeks to assess demand trends and the outlook following sizable sector moves.

Restaurant industry traffic remained bifurcated in the first half of 2026, with specialty coffee, fast casual and fine dining leading growth while quick-service restaurants and casual dining lagged, according to a recent call UBS hosted with Placer.ai. Lower and middle income consumers pulled back on spending due to gas prices and shifted toward grocery stores, gas stations, convenience stores and dollar stores for better value.

Consumer spending at small business restaurants rose 0.2% year-over-year in June, improving from a 0.6% decline in May, according to Fiserv data. Full-service restaurants showed strength with sales up 2% and traffic up 0.4%, while limited-service restaurants saw sales down 2.7% and traffic down 5.0%.

Restaurant hiring decreased in June, with eating and drinking places down roughly 32,900 jobs for the month, per government data. April and May data were revised to show an increase of roughly 24,000 jobs across both months versus the previously reported 83,000 jobs.

UBS expects consumer retail traffic to improve in the second half if gas prices ease further, particularly benefiting the quick-service restaurant category. The firm notes restaurant traffic may still face challenges from food-at-home competition and potential GLP-1 drug impacts, with convenience store food offerings highlighted as a disruptor for quick-service restaurants during breakfast and lunch.

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