Habit Restaurants, which sells the best burger in America, thinks that US consumers are in a bad way.
On the company’s earnings conference call on Wednesday, Habit CEO Russ Bendel said the promotional and discounting environment seems more aggressive than it was during the last recession.
“We feel the biggest headwind we have with sales right now is a little bit of the state of the consumer,” Bendel said on the call.
“I am not an economist, so I am not going to get into that. But without question the amount of discounting and aggressive promotional offers both below us and above us feels like it’s heavier than it was in 2008 and 2009.”
More discounting most simply indicates a lack of demand, so the immediate read-through here is bad for the economy.
The latest economic data we’ve gotten on the state of the consumer, in a bit of a contrast to Bendel’s view, is that the consumer remains pretty solid.
Personal consumption was up 4.2% in the second quarter of 2016, one of the best quarters for consumer spending since the financial crisis and serving as the saving grace for what was otherwise a disappointing GDP reading.
Recent readings on consumer confidence from The Conference Board and the University of Michigan’s survey also indicate that despite some concerns among high-income households over Brexit, consumers remain broadly optimistic.
Bendel and Habit, however, are dealing with what appears to be a clear slowdown in the restaurant sector. A drop in the price of food at home as well as rising labour costs — which Bendel also mentioned on Habit’s call — are putting other pressures on the restaurant space more broadly.
On Wednesday Habit reported second quarter earnings that were a bit of a disappointing, earning $0.09 per share on an adjusted basis on revenue of $71.1 million. Wall Street expected earnings per share of $0.10.
Shares of the burger chain, which are down about 45% over the last year, were little-changed in pre-market trading.
In 2014, Consumer Reports named Habit Burger Grill the best burger in America.