A McDonald’s crew member prepares fries in Miami, Florida.
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It’s a perennial question at fast food stands: Do you want fries with that?
Respondents continue to respond positively at a higher than average rate, a leading potato supplier said. It underscores the resilience of consumer spending, even as inflation squeezes pocketbooks and pandemic savings dry up.
A greater share of customers continue to add the iconic side to their meal orders than in the past, according to the frozen potato purveyor Lamb Weston. Looking at the bigger picture, the strength of the so-called brood attachment rate reinforces the economic data, showing the willingness of average Americans to continue paying for everyday luxuries.
“The brood attachment rate remained fairly stable,” CEO Thomas Werner said during the company’s earnings conference call Thursday. “It’s above historical levels for the last two, three years.”
This is just one example of how consumers continue to buy despite increasing reasons to tighten their wallets, a phenomenon that has economists puzzled.
Perhaps economists should have looked at the “fry sticking rate” before Friday’s jobs report. Nonfarm payrolls rose by 303,000 jobs in March, according to new data. That was well above the estimate of 200,000 economists polled by Dow Jones and offered the latest sign of strength in the economy.
Spending on retail and foodservice in America topped $700 billion in February, according to advanced and custom government elements. That’s about 1.5% higher in February than the same month a year ago. And it’s 38.5% higher than in February 2019 — widely considered the last month before the pandemic shook nearly every aspect of the economy.
Rising wages and fiscal stimulus filled bank accounts during the early years of the Covid-19 crisis, prompting increased buying. But in more recent years, U.S. consumers have felt increasing pressure amid runaway inflation, rising interest rates and the end of pandemic-era economic benefits.
And experts have been surprised by Americans’ unwavering penchant for using their cash, even as consumer confidence plummets and fears of a recession swirl. The choice to add French fries provides a case study in what some have called “YOLO” or “revenge” spending, the former term being named after the acronym “you only live once.”
Slowdown elsewhere
Certainly, there are signs of economic pressure on consumers influencing monetary decisions about food. WK Kellogg CEO Gary Pilnick told CNBC earlier this year that cereal was in vogue as a dinner alternative while shoppers grappled with higher food costs.
Although customers are still opting for fries, Werner said Lamb Weston’s volume has taken a hit because of softer foot traffic overall at the restaurants it serves. That slide comes as consumers get used to higher prices for menu items as a result of inflation, the executive said. (Lamb Weston supplies fries for large chains such as McDonalds and Chik-fil-A, although Werner did not specify which companies are experiencing a slowdown.)
“On the one hand, French fries remain as popular as ever with consumers,” Werner said. “But on the other hand, consumers are going out to eat less often.”
Lamb Weston on Thursday reported adjusted earnings and revenue for the fiscal third quarter that were below analysts’ estimates polled by FactSet. The Idaho-based company’s outlook for full-year performance in both financial measures also missed Wall Street forecasts.
Shares fell more than 19% in Thursday’s session, hitting lows not seen in more than a year.