02:15 PM EDT, 08/27/2024 (MT Newswires) -- Restaurant traffic trends are expected to remain depressed over the rest of the year, while factors like easing comparisons and value offers may provide "some lift," UBS Securities said in a note e-mailed Tuesday.

The first-half's "challenged" traffic trends are seen continuing through the end of the year amid signs of weakness spreading to middle-income consumers, high pricing levels, and the upcoming US presidential election in November, UBS analysts, including Dennis Geiger, said. However, easing comparisons, marketing, limited-time and value offers may help improve trends over the coming months, the analysts said.

"Our franchisee discussions continue to highlight modest traffic benefits from value deals and promo offers, while select new menu items and marketing campaigns are driving sales boosts," they wrote.

McDonald's (MCD) is seeing "modest" benefits from its $5 meal deal, with visits remaining high since the offer's launch in June, UBS said, citing Placer data. Restaurant Brands International (QSR) unit Burger King's $5 "Your Way Meal" has seen a "modest traffic boost," while the brand's Fiery menu launch seems to have increased visits, according to the note.

"Meal deals at convenience stores remain an important lever for foodservice traffic in the channel, (with) benefits from new deals (and) options," the analysts said.

On Thursday, CAVA Group ( CAVA ) reported that its fiscal second-quarter same restaurant sales jumped 14%, including traffic growth of 9.5%. The results highlighted a continuation of the trend of ongoing strength at several emerging fast casual brands in the ongoing earnings season, UBS said.

"Ongoing momentum for select emerging fast casual brands highlights benefits from on trend (and) expanding menus, growing consumer awareness, and a compelling value proposition," the analysts wrote. "On value, select fast casual brands are increasing share likely given greater exposure to a higher income consumer that is less impacted by the currently challenged macro, while 'value for the money' is resonating (with) customers."

Investors continue to prefer restaurants with momentum in traffic and same-store sales, especially the likes of Texas Roadhouse ( TXRH ) and Wingstop ( WING ) , both of which are positioned to maintain strength into the second half of the year, according to UBS. "Preference for quality defensive has increased some against a difficult macro, (with) still mixed but growing support for select franchised (quick-service restaurants) positioned for resiliency."

Investor interest has grown in select restaurants that have underperformed so far this year and may offer "solid" returns, according to the note.

A greater focus within casual dining has been on Darden Restaurants' ( DRI ) "Never-Ending Pasta" promotion at Olive Garden ( DRI ) that started Monday, the analysts said. "Expectations are that sales will benefit from the extra (week, with) investors also interested in potential impacts to casual dining competitors in the event (Darden) begins to increase promo activity."

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