An increasing number of people are stepping outdoors as the vaccination drive has gathered steam and the economy is reopening. This has seen more people visiting restaurants physically, thereby driving sales.

Although the Delta variant of the coronavirus has been a cause of concern lately, people are more confident now. This is helping restaurants bounce back after taking a battering last year.

Restaurant Footfall, Sales Increase

According to the latest data from the NPD Group, more people are visiting restaurants physically over the past few months. Although total restaurant visits are still down 6% from 2019, they were up 23% year over year in May.

Sales were mainly dependent online last year around this time as most restaurants and bars were either closed or had restricted entry due to COVID-19. This saw sales taking a hit. However, things started changing from the beginning of this year as millions of Americans started getting vaccinated.

Restaurants started seeing more footfall and that’s getting reflected in sales. In June, sales at restaurants and bars grew with consumers spending 2.3% higher in receipts, the Commerce Department said. On a year-over-year basis, sales increased a whopping 40.2% in June.

Restaurant Sales Poised to Grow

Last year, the service industry took a bad hit due to the pandemic, which saw people spending more on electronic and essential goods as they worked and learnt remotely.

However, spending on services is picking up again, with retail sales slowing down as spending on goods continue to decline.

So far, more than 160 million people have been vaccinated across the United States. This has seen the government easing restrictions and more people gathering confidence to step out of their homes.

Traveling is on the rise once again and people are planning holidays. Thus, restaurant sales are likely to get a further boost in the coming months.

According to a Restaurant Business Online article, citing a report by the National Restaurant Association, U.S. restaurant sales are fast bouncing back to normal after declining 19.2% in 2020, which was also the most challenging year for the industry.

Our Choices

Given the situation, it makes good sense to invest in restaurant stocks. We have handpicked stocks of five restaurant players, each carrying a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dine Brands Global, Inc. DIN is a full-service dining company. It operates and franchises restaurants under both the Applebee's Neighborhood Grill & Bar and IHOP brands.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. The company sports a Zacks Rank #1.

Papa John’s International, Inc. PZZA operates and franchises pizza delivery and carryout restaurants in the United States and other specific international markets. Its dine-in and delivery restaurants operate under the brand name Papa John’s.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 6.8% over the past 60 days. Papa John’s carries a Zacks Rank #1.

Ruths Hospitality Group, Inc. RUTH is the largest fine-dining steakhouse company in the United States as measured by the total number of company-owned and franchisee-owned restaurants, with over 150 Ruth's Chris Steak House locations worldwide.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 12.6% over the past 60 days. The company has a Zacks Rank #1.

The Wendy’s Company WEN operates through its subsidiary holding company — Wendy’s Restaurants, LLC. The fast-food chain through its subsidiary operates as a franchisor of the Wendy's restaurant system.

The company’s expected earnings growth rate for the current year is 29.8%. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the past 60 days. The Wendy’s Company carries a Zacks Rank #2.

Yum! Brands, Inc. YUM is the global leader in multi-branding and offers consumers more choice and convenience at one outlet. The company presently reports through four segments —KFC, Pizza Hut, Taco Bell and Habit Burger Grill.

The company’s expected earnings growth rate for next year is 19.6%. The Zacks Consensus Estimate for current-year earnings has improved 5.1% over the past 60 days. Yum! Brands carries a Zacks Rank #2.

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