A McDonald's crew member prepares French fries in Miami, Florida.
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It's a timeless question in fast food restaurants: Do you want fries with that?
One major potato supplier noted that respondents continue to answer affirmatively at a higher than average rate. It highlights the resilience of consumer spending, even as inflation squeezes pocketbooks and savings dry up due to the pandemic.
A larger percentage of customers continue to add the premium side to meal orders than in the past, according to the frozen potato supplier Lamb Weston. Looking at the bigger picture, the strength of the so-called fry attachment rate is bolstering economic data, showing the willingness of ordinary Americans to keep spending for everyday luxuries.
“The rate of fry attachments has remained largely flat,” CEO Thomas Werner said during the company's earnings call Thursday. “It has been above historical levels for the last two or three years.”
This is just one example of how consumers continue to buy despite increasing reasons for financial tightening, a phenomenon that mystifies economists.
Spending on retail and food services in America exceeded $700 billion in February, according to advance and revised government figures. This is about 1.5% higher than the same month last year. This is 38.5% higher compared to February 2019.
Rising wages and fiscal stimulus measures stuffed bank accounts during the early years of the Covid-19 crisis, leading to increased purchases. But in recent years, American consumers have felt increasing pressure amid runaway inflation, rising interest rates and the end of pandemic-era fiscal benefits.
Experts have been surprised by Americans' consistent tendency to use their money, even as consumer confidence deteriorates and fears of economic downturn spiral. The option to add fries provides one case study in what some have called “YOLO” or “revenge” spending, with the first term named after the acronym “You Only Live Once.”
Slow down elsewhere
There are certainly signs of financial pressures on consumers influencing food-related monetary decisions. W. K. Kellogg CEO Gary Belnick told CNBC earlier this year that cereal was popular as a dinner alternative while shoppers faced rising grocery costs.
Although customers are still opting for french fries, Werner said Lamb Weston's turnover has taken a hit due to generally weak traffic at the restaurants it serves. The executive said this decline comes as consumers become accustomed to increasing prices of menu items as a result of inflation. (Lamb Weston supplies potatoes to large chains such as… McDonald's and Chick-fil-A, although Werner did not specify which companies are experiencing the slowdown.)
“On the one hand, French fries are still as popular with consumers as ever,” Werner said. “But on the other hand, consumers are going out to eat less.”
Lamb Weston on Thursday reported adjusted earnings and revenue for its fiscal third quarter that fell short of estimates from analysts surveyed by FactSet. The Idaho-based company's forecast for full-year performance on both financial measures also fell short of Wall Street expectations.
Shares fell more than 19% in Thursday's session, touching lows not seen in more than a year.
Correction: This article has been updated to remove inaccurate reference to the timing of the COVID pandemic. This article has also been updated with the correct spelling of Chick-fil-A.
