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The chips are down: pizza, fried chicken and doughnut shares plunge on ASX as living costs bite budgets
TL;DR
Fast food shares, including Domino's and KFC, have plunged on the ASX due to rising living costs and operational expenses. Consumers are increasingly viewing fast food as a luxury amid economic pressures.
Key points
- Fast food is becoming a luxury due to rising living costs.
- Shares in major fast food outlets have seen double-digit falls.
- Concerns over consumer spending are impacting fast food stocks.
- Surging oil prices are tied to rising operational costs.
- The broader ASX remains robust despite these declines.
Mentioned in this story
Domino's PizzaCollins FoodsRetail Food GroupGuzman y Gomez
Once a symbol of cheap eating, fast food is transforming into a luxury many can no longer afford due to resurgent living costs.
This shift is reflected on the ASX, where major pizza, fried chicken and doughnut outlets are seeing significant price drops, raising the question: are consumers so downbeat that they are even giving up on fast food?
Shares in Domino’s Pizza, KFC operator Collins Foods and multi-brand food franchise owner Retail Food Group have all suffered double-digit falls over the past two months, coinciding with surging oil prices tied to the US-Israel war on Iran.
The Guzman y Gomez share price is also down, even as the broader ASX has proven robust.
Lochlan Halloway, an equity market strategist at Morningstar, says the stocks are under pressure because concerns over consumer spending are coinciding with fast-rising operational costs.
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“Fast food is a discretionary purchase, something that’s probably fairly easy to cut if your budget’s pinched, and so they might be a casualty of consumers just trading out of the category entirely,” Halloway says.
“You’ve also got costs increasing materially due to high fuel prices, interest rate concerns and other forms of cost pressures. You’ve got a squeeze from both ends.”
Consumer confidence has plunged in Australia, as anxiety over job prospects and employment security reaches levels not seen since the early pandemic, according to the closely watched Westpac-Melbourne Institute consumer sentiment index, released earlier in April.
Consumer prices are growing at their fastest pace in two and a half years, with inflation jumping to 4.6% in the year to March as the fallout from the fuel shock starts to ripple through the economy.
For many Australians, the sight of high prices on roadside fuel boards in March was enough to trigger an immediate response, with cafes reporting a fall in the sale of takeaway coffees, restaurants recording a pullback in spending, and sales of sliding.
Q&A
Why are fast food shares dropping on the ASX?
Fast food shares are dropping due to rising living costs and operational expenses, leading to concerns over consumer spending.
Which fast food companies are experiencing share price declines?
Domino's Pizza, Collins Foods (KFC), and Retail Food Group are among the companies experiencing significant share price declines.
How have oil prices affected fast food stocks in Australia?
Surging oil prices, linked to the US-Israel war on Iran, have contributed to rising operational costs, impacting fast food stocks.
What does the decline in fast food shares indicate about consumer behavior?
The decline in fast food shares suggests that consumers may be cutting back on spending, viewing fast food as a luxury they can no longer afford.
