Restaurant stocks begin the third quarter with another drop

Restaurants stocks began the third quarter with another swing lower as investors stayed cautious ahead of the Q2 earnings reporting season. The AdvisorShares Restaurant ETF (NYSEARCA:EATZ) and the Dow Jones US Restaurants & Bars Index (DJUUSRU) were both down 1.6% in late afternoon trading.

Analysts have warned that some restaurant companies are facing margin pressure as prices have come down in many markets, while traffic remains pressured. Notably, large fast-food restaurant chains such as McDonald’s (MCD), Taco Bell (YUM), and Burger King (QSR) have been firing off aggressive value deals.

The biggest decliners for the session were Pinstripes (PNST) -17.1%, Red Robin Gourmet (RRGB) -8.1%, Denny’s (DENN) -7.8%, First Watch Restaurant Group (FWRG) -5.2%, TH International (THCH) -5.1%, Cracker Barrel Old Country Stores (CBRL) -3.7%, Shake Shack (SHAK) -3.4%, and Jack in the Box (JACK) -3.4%.

Over the last six weeks, restaurant stocks that have shed more than 10% include Kura Sushi USA (KRUS) -38.2%, The ONE Group Hospitality (STKS) -21.%, FAT Brands(FAT) -15.3%, Yum China (YUMC) -13.1%, Potbelly Corporation (PBPB) -11.5%, and Red Robin Gourmet Burgers (RRGB) -10.0%.