What’s Eating at Restaurant Stocks?

Summary

Motley Fool Money – What’s Eating at Restaurant Stocks?

Air Date: August 18, 2025
Host: Rick Menars
Analysts: Alicia Alfieri, Jason Hall

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Episode Overview

This episode dives into the recent challenges faced by restaurant stocks amid a tough economic climate, spotlighting why both high-flying chains and discount leaders are seeing headwinds. The panel also examines some surprising companies that have more than doubled their stock prices this year, playing a game of “Beat or Defeat” to assess their prospects. The episode offers a long-term investor’s perspective, focusing on what’s driving trends and where opportunities might arise.

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Key Discussion Points & Insights

1. Earnings Season: Companies to Watch

(00:00–06:09)

TJX Companies (T.J.Maxx, Marshalls, HomeGoods)

• Jason Hall: Praises TJX’s ability to excel as a buyer and retailer even in tough economies.

  • “Besides Costco, TJX may be the best retailer in the U.S. It is exceptional at two really important things: being a great buyer and getting merchandise in the right stores, in the right markets, to move it quickly.” (00:50)
  • TJX acts as a “release valve” for excess inventory in retail, securing good deals on merchandise.
  • Their "treasure hunt" in-store experience draws both value-seeking and affluent shoppers.
  • Despite a tough climate, last quarter's comps were up 3% versus competitors’ declines.

• Alicia Alfieri: Asks if TJX will benefit as shoppers turn to value stores.

  • Jason expects continued resilience: “People whose personal finance situation is still fine... are going to continue to go there more. Instead of shopping upstream, they're going to come downstream.” (02:38)

Viking Holdings (River Cruises)

• Alicia Alfieri: Interested due to the brand’s devoted clientele in the affluent retiree segment.
  • Strong bookings: “By the end of their first quarter, Viking already had 92% of their 2025 capacity booked.” (03:19)
  • Potential downside in downturns, but less vulnerable than broader cruise lines since they cater to an older, affluent demographic.

Baidu (China’s Search Giant)

• Rick Menars: Notes struggles with revenue and competition, but highlights Baidu’s investments in AI and cloud.
  • “You can buy a cash rich Baidu for less than 10 times next year's targets.” (04:35)
• Baidu faces challenges due to tariffs and access to AI chips but may innovate its way through.

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2. Restaurant Stocks: What’s Eating Them?

(06:40–10:46)

• Alicia Alfieri: Economic pressures are dampening restaurant spending, especially at higher-priced chains.

  • Chipotle’s comparable sales fell 4% after an 11% rise last year.
    • “Chipotle talked about how much their traffic has been tracking along with consumer sentiment.” (06:58)
    • Management attributes some losses to diners switching to $5 meal deals elsewhere.
  • McDonald’s stands out, riding affordability with a 3.8% global comp sales increase.
    • $5 meal deal and $2.99 snack wraps are successes, but even McDonald's sees declining visits from core lower-income customers.
    • There’s a caution around over-discounting to maintain profitability.

• Rick’s observation: Highlights McDonald’s “barbell pricing”—from $5 deals to $16 collectible kids’ meals.

  • Alicia calls this a smart strategy: “I do think that it's smart to try to hit multiple sides of the consumer continuum.” (09:15)

• Jason Hall: Sees industry-wide pullback as a potential opportunity for value investors.

  • “As an investor, honestly, that makes me a little bit more interested... because it could create some opportunities for investors to buy some really great quality businesses that have strong track records over the long term.” (10:04)
  • Business models aren’t broken; it’s a temporary confidence issue.

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3. Beat or Defeat: 2025’s Surprising Stock Doublers

(11:25–15:13)

The panel plays “Beat or Defeat,” predicting if these big gainers will continue to outperform.

Roblox (Up 117% YTD)

• Jason Hall: Defeat. Points to high valuation (19x sales), mounting losses, and legal headwinds.
  • “It just seems like the valuation metrics don't necessarily support a continued rally.” (11:55)
• Alicia Alfieri: Sees potential if legal issues (child safety lawsuit in Louisiana) are resolved.
  • “If Roblox can solve this issue, I think it's actually a good candidate to beat... Average daily users up 41%, hours of engagement up 58% year over year.” (12:35)

Palantir (Up 139% YTD)

• Jason Hall: Defeat. Has shorted the stock.
  • “Let me say this. I think it is an extraordinary business. But the valuation... is incredibly expensive and the expectations I think have become so dislodged from what the business can realistically do.” (13:11)
• Alicia Alfieri: Confirms concerns, citing a price-to-sales ratio over 100.
  • “Priced beyond perfection. Defeat.” (14:09)

Celsius (Up 150% YTD)

• Alicia Alfieri: Beat, due to effective acquisitions (Aulani Nu) and growth, but warns of volatility.
  • “It has momentum, so I'm thinking it'll be [beat].” (14:22)
• Jason Hall: Also Beat. Notes low expectations, the strategic Aulani Nu buy, and international opportunity.
  • “Of these three, this is the one that's most likely to beat.” (14:44)

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Notable Quotes & Moments

• Jason Hall on TJX:
  “Its strength as a buyer is going to be a really good situation for it, particularly if we see tariffs do weird things with inventory levels.” (02:38)

• Alicia Alfieri on Chipotle’s struggle:
  “Management believes that some consumers are making eating decisions based on price right now.” (07:14)

• Rick Menars on McDonald’s pricing:
  “So it seems like McDonald's is playing both the low end and the high end. Does that barbell pricing, does that sound like it’s a good strategy for you or is that a problem?” (08:55)

• Jason Hall on investor opportunities:
  “That’s one of the ways that long term investors can juice their portfolios and really win over the long term.” (10:13)

• Alicia Alfieri on Celsius volatility:
  “Anyone who has been watching this stock... knows it’s been a roller coaster and it could just as easily fall into that defeat category.” (14:31)

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Timestamps for Key Segments

• 00:00–06:09: Earnings season highlights (TJX, Viking, Baidu)
• 06:40–10:46: Restaurant stocks under pressure (Chipotle, McDonald's)
• 11:25–15:13: Beat or Defeat? – Roblox, Palantir, Celsius

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Takeaway for Investors

The market’s recent turbulence—especially in restaurant and high-growth stock segments—is more a function of shifting consumer sentiment and high expectations than broken business models. Opportunities may arise for patient investors in fundamentally strong companies. As always, valuation and long-term trends matter, and temporary market swoons can signal buy moments for disciplined Fools.

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Transcript

[A]

Foreign digestion for stocks. Interesting companies reporting earnings this week, incredible gains this year from unlikely companies. Let's dive in to find out right now on Motley Fool Money, I'm Rick Menars and today I'm joined by fellow analysts Alicia Alfieri and Jason hall with a look at what's eating at restaurant stocks. Is this this summer. We'll also look at some of the more surprising companies that have more than doubled this year. But first, it's still earnings season. A lot of familiar names are stepping up with fresh financials this week. A lot of obscure ones too. Of course. I want to go around the room to see if there's a company that has your eye, if not your heart, reporting quarterly results this week. Let's start with you, Jason.

[B]

Yeah. So TJX companies, it's definitely got my eye, a little bit of my heart, but none of my wallet yet because of valuation. But TJX Companies, its parent company of T.J. maxx, Marshalls home goods, other clothing and home furnishing retailers, reports Wednesday morning. And I'll be honest with you, Rick. I think besides Costco, TJX may be the best retailer in the U.S. it is exceptional at two really important things. The one that doesn't get enough credit from the average person or investor is how good of a buyer it is. It's like the release valve for excess inventory for manufacturers, other retailers and distributors. It's really good at getting great deals on the cost side of buying that. But here's the thing. The actual hardest part is getting that merchand in the right stores, in the right markets to move it quickly and then turn it into more cash than it paid for it. It's exceptional. If that part of its business model is the treasure hunt experience. They cater both to people that have plenty of extra disposable income that are kind of looking for that great deal, but also just the regular people that are looking for value for name brand products at extremely low costs. And that combined expertise is a savvy buyer and extremely efficient retail operator results in great margins and it keeps customers coming in across economic environments. If you look last quarter comps were up 3% as customers are spending more money. You look at most of the competition in discount retail. You see the other thing, comps are shrinking. People are coming in less and spending less. I'm really interested to see if TJX can continue in operating so well in what's really a challenging environment for discount retail.

[C]

Well, so I have a question for you, Jason, on tjx. So with the economic uncertainty looming, do you think we're going to see more value shoppers going to TJX to look to find these deals, or do you think these value shoppers are going to be staying home?

[B]

I think it's going to do well, and I think what we'll see is what we've seen from it in the past, and that is people whose personal finance situation is still fine are going to continue to go there more. Instead of maybe shopping upstream, they're going to come downstream. Whether they have to or not, they're going to choose to because of sentiment, and that's probably going to offset some of the other customers that are just truly having to pull back. And its strength as a buyer is going to be a really good situation for it, particularly if we see tariffs do weird things with inventory levels. They're not going to mess around. They're going to take advantage of that opportunity. So I think even if maybe they don't grow as fast, they're definitely going to prove how resilient that their business model is.

[A]

Alicia, what you got?

[C]

Well, so this week I'm excited to see what is going on with Viking Holdings. So it's a company that's close to my heart because my dad, who just turned 70, has wanted to do a European river cruise for a really long time. And so Viking is smaller than other cruise companies, but it's the top dog in the North American outbound river cruise market. It's got a strong brand that ranks highly among the affluent 55 and older crowd, which Viking believes has been mostly underserved in the cruise industry, with the exception of them. And by the end of their first quarter, Viking already had 92% of their 2025 capacity booked. So I'm excited to see what comes next for them.

[A]

Yeah, I'm a fan of Viking too, Alicia, so probably like your dad, I've looked at these cruises. They are not cheap. River cruises are not your, basically Carnival, you know, big ship with a lot of people and a lot of low prices. Are they susceptible to an economic downturn?

[C]

That's a good question, I think, because their focus is so much on this retiree community of 55 and older. Granted, it'd be wonderful to retire at 55, but people that tend to be affluent and retired, I think they have less of a risk. But as with anything that's discretionary, they can potentially take a hit with economic uncertainty.

[A]

Yeah, thanks. I'm gonna go with Baidu. So Bidu, the company behind China's leading search engine, is Going through some growing PA Revenue has declined in half of the last six years. And Baidu delivered double digit top line growth just one of those years. Expectations are low heading into this week's results. Analysts see a 3% year over year decline in revenue on a sharp slide in profitability. It's not a good look, but Baidu has come through with double digit percentage beats on the bottom line in back to back quarters. It's also been toiling away in AI, cloud computing and autonomous driving long before those areas were cool. Those are bets that will pay off over time. In the meantime, you can buy a cash rich Baidu for less than 10 times next year's targets.

[B]

So Baidu thinking about those kind of next bet things. Rick, do you think Baidu is one of the companies that's going to be able to continue to innovate even as the Chinese market continues to be challenged with access to the best chips for AI?

[A]

Yeah. So obviously the whole AI revolution in China has this whole thing happening right now caught in the tariff war. I do think that either whether they grow it on their own or they find ways to do it, Baidu has offices even in the US So they have places, they have intel all over the world. It's not just a purely Chinese company. I think they will figure it out. And right now it's just a very competitive environment, which is why so many companies are Baidu struggling, because so many other companies are also struggling to stand out in this environment. So Baidu and TJX report on Wednesday morning. Viking disembarks on Tuesday morning. Companies keep earning. We keep learning. Coming up next, Hamburger Helper. What's going on with restaurant stocks? Hungry for more? Order up.

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[A]

It's been a challenging summer for restaurant stocks, particularly rule breaker chains. Cava took a 17% hit in a single trading day last week after posting disappointing comparable restaurant sales. We saw Wingstop, sweetgreen and even Chipotle delivered negative comps. What's burning in the kitchen? Let's dig in. Alicia.

[C]

Well, so it looks like the economy is taking a bite out of consumers desire to dine out. Or at the very least, it's making them a lot more price aware. So if we look at Chipotle, which is an old school rule breaker, in its last quarter, comparable sales fell 4% year over year. And that's a big difference from last year when comparable sales grew 11% year over year. And Chipotle talked about how much their traffic has been tracking along with consumer sentiment. And management believes that some consumers are making eating decisions based on price right now. They also mentioned some of their competitors have $5 meals and they believe that's where a lot of the consumers are heading. So speaking of $5 meals, let's talk about McDonald's. Unlike Chipotle and some other restaurant chains that saw same store sales declines, McDonald's saw its global comparable sales grow 3.8%. And that's a big improvement from last year when the company's comparable sales fell 1%. And by the way, McDonald's saw sales growth in all of their world regions. And McDonald's knows that its affordability was a major driver for its performance and says that the $5 meal deal continues to be a hit. And the company also realizes that the 299 price point they sell snack wraps for, that looks to be attractive to consumers as well. But even with their performance this quarter, McDonald's is still cautious about upcoming quarters and the US consumer. But even they commented that visits from lower income consumers who tend to eat at McDonald's more than other groups have declined. And the company believes that it'll be really important for them to re engage with these customers. One of the things that they talked about is working with their US franchisees to look at the core menu pricing. But they do have to be careful here. Too many cuts and McDonald's will be buying their revenue by potentially sacrificing profitability.

[A]

Yeah, so just a couple of days ago, I spent $16 on a McDonaldland adult kids meal. It's basically this, this thing comes with like a grimace shake. It comes with a collectible, like a, like a tin collectible with a little toy, with a card game. So it seems like McDonald's is playing both the low end and the high end. Does that barbell pricing, does that sound like it's a good strategy for you or is that a problem?

[C]

Well, I do think that it's smart to try to hit multiple sides of the consumer continuum. Right. As opposed to really just targeting one group. I think that can help make their Revenues less lumpy when we go into different parts of the economic cycle.

[A]

All right, I'm loving it. So, Jason, your thoughts?

[B]

$16. When I was a kid, that'd feed a family of four, McDonald's and everybody would get soft serve ice cream. Right. It's remarkable how that's changed. I'll say this. I think the interesting thing to the observation as an investor is it's across the sector. Right. And it's a lot of like what we're seeing with specialty and discount retail too. It's a clear consumer trend that, you know, consumers are starting to pull back in some areas. And as an investor, honestly, that makes me a little bit more interested and less concerned about individual companies because it means we're less likely to have a company that's struggling in a good market. The market is down and it's weak. And I start looking more closely when negative sentiment like that is happening, especially if it drives stock prices down, because it could create some opportunities for investors to buy some really great quality businesses that have strong track records over the long term and then just hold while the market corrects and we return back to a healthy market at some point in future quarters or even future years. That's one of the ways that long term investors can juice their portfolios and really win over the long term.

[A]

Yeah. So basically the business models aren't broken, just the consumer sentiment is what needs to temporarily come back in some capacity.

[B]

That's exactly what it looks like to me.

[A]

Perfect. All right, so when we get back from the break, we'll have fun with some of this year's hottest stocks. Stay with us. We ordered a cake.

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[A]

And finally, there have been some very surprising stocks that have more than doubled this year. I'm going to play a little game with you guys called beat or defeat. I want you guys to tell me if beat. If you think they can continue to beat the market for the rest of the year, the next four and a half months or so, or defeat. If you think that they're going to actually return back to their norms and prove mortals. So don't overthink it. We're going to go over three stocks. The first one rule breaker, Roblox, it's up 117% through Thursday's close, moved lower on Friday. But right now, Jason, beat or defeat?

[B]

So I'm going to say defeat now. In the news right now, there's some things with Louisiana is suing Roblox over some concerns about things with defeat. Child safety, we won't get into that. But I think looking beyond that, what I see with Roblox right now is a great business with some really good growth right now. But it just seems like that the, the, the metrics, valuation metrics don't necessarily support a continued railing 19 times sales. They lost about $500 million over the trading 12 months and $500 million of that was stock based compensation. So it's just going to be hard to continue that kind of run at this valuation. I think we're more likely to sell some profit taking before the end of the year that maybe undermines some, a little bit of that great results that we've had.

[C]

Alicia, I think this one is tricky. I think the Louisiana Attorney General suing Roblox, alleging the platform doesn't do enough to protect minors. I think if that's true, that's a big problem. But if Roblox can solve this issue, I think it's actually a good candidate to beat. We've got really impressive metrics happening here. Average daily users up 41% years over year over year. Hours of engagement up 58% year over year.

[B]

The bookings numbers are incredible. Yeah.

[A]

So let's look at Palantir, up 139% this year. Jason, start us off.

[B]

Are you sure you want me to start here? I've bought puts. I'm actually shorting Palantir via puts. They're very long term, like multiple years out. So I'm going to say that now I'm making a multiple year bet that the stock is going to decline between now and the end of the year. I think that we could start to see some of that happen. Let me say this, I think it is an extraordinary business. But the valuation I said rule breakers is expensive. Palantir makes rule breakers look like a jalopy. It is incredibly expensive and the expectations I think have become so dislodged from what the business can realistically do. An incredible business can do that. I think it's going to struggle and I think it's going to be defeated by the market.

[C]

All right, Alicia, I agree with Jason here. Last quarter was impressive revenues up 48%. Cash generating business management raised guidance. Wow. It's valuation. Price to sales above 100.

[B]

Price to sales people. Price to sales.

[A]

Right.

[C]

Price to sales. We're not even talking price to earnings or anything like that. Priced beyond perfection. Defeat.

[A]

All right, finally, let's close with former rule breakers Celsius up 150%. Alicia, I'll start with you.

[C]

Yeah. So its acquisition of Aulani Nu seems to be helping Celsius. And the top line really accelerated this last quarter, again, partially due to that acquisition. It has momentum, so I'm thinking it'll be. But anyone who has been watching this stock over the last little bit knows it's been a roller coaster and it could just as easily fall into that defeat category.

[B]

Even as much as the stock has come up, I think that the market still has really, really low expectations for the business. The Pepsi distribution deal was great until it wasn't. So that's a challenge. The core Celsius brands have been pretty flattish. The international market is really wide open. Aulani Nu expands them and really gives them a lot of control over that cohort of the market where they're really dominant. I think of these three, this is the one that's most likely to beat. So I'm going to say I think it'll beat.

[A]

All right, great. So, Alicia and Jason, thank you for making this Monday more magic and less manic. As always, people on the program may have interest in the stocks they talk about, and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes For Alicia Alfieri, Jason hall, and the entire Motley fool money team, I'm Rick Nars. I'll gladly pay you Tuesday for a Motley fool money today.