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Just like you might turn to McDonald’s for truly delectable soft serve, Denny’s for breakfast at a mock trial tournament in middle school, and KFC when all hope is lost, earnings reports from the key fast-food players all have a slightly different function, too.
Denny’s, which reported first this week, was something of an appetizer—one that left a not-so-savory taste in the mouth about the state of the US consumer.
The chain’s adjusted net income came in at $4.8 million, down from $6.9 million the same time last year, but total operating revenue was $117.7 million, up from $115.9 million last year.
Denny’s CEO Kelli Valade said at the top of the company’s earnings call that the “very choppy consumer environment” Denny’s faced in Q1 continued into Q2.
“Household incomes remain under pressure and consumer sentiment continues to be volatile, meaning consumers are pulling back on spending across most categories, and they’re being more selective about where to spend,” Valade said, adding the company expects “the volatility in consumer sentiment will moderate over time.”
And that was a telling appetizer for the main course(s). Yum Brands, which owns Taco Bell, KFC, and Pizza Hut, reported net income of $374 million, up from $367 million a year ago.
Despite bright spots in its earnings report, CEO David Gibbs was quick to acknowledge the “tough consumer environment” at the start of the company’s earnings call. And domestic challenges for Pizza Hut and KFC were on display; both brands reported US same-store sales declines of 5%. Gibbs noted that both chains struggled to convey a value proposition to consumers this quarter.
Taco Bell fared better, with same-store sales growth of 4%. “Most people are reporting negative quarters,” Gibbs said. “We haven’t even had a negative week for Taco Bell.” The power of crunchy tacos…
For dessert? McDonald’s, which offered a look at the spending habits of low-income consumers, while showing signs of a rebound for the fast-food giant.
Same-store sales grew 3.8% in the three months ending June 30, McDonald’s reported. That was higher than analysts expected, and a welcome change from the last four quarters when same-store sales either dropped or changed only slightly, per the Wall Street Journal.
But executives took pains to point out that the low-income consumer is still cash-strapped, meaning McDonald’s is far from out of the woods. In previous quarters, McDonald’s has reported a spending and visitation pullback from low-income customers, which has pushed the company to focus on affordability and value.
For Q2 2025, McDonald’s CEO Chris Kempczinski noted during an earnings call that store visits from low-income customers “once again declined by double digits versus the prior year period,” while visits from middle-income customers improved from Q1. He stressed that “reengaging the low-income consumer is critical” since they tend to frequent McDonald’s more often than middle- and high-income consumers.
“This bifurcated consumer base is why we remain cautious about the overall near-term health of the US consumer,” Kempczinski said. “In this environment, we will continue to remain agile with respect to our value offerings to ensure the US strengthens its leadership in value and affordability.”