A McDonald’s worker prepares french fries in Miami, Florida.
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It’s the eternal question at the fast food counter: Do you want fries with that?
A top potato supplier says respondents continue to answer yes at an above-average rate. It underscores the resilience of consumer spending even as inflation squeezes wallets and pandemic savings dry up.
Frozen potato suppliers say more customers are adding the iconic side to their meal orders than in the past lamb weston. Looking at the bigger picture, economic data is underpinned by strong so-called “fry attachment rates” that show average Americans are still willing to spend money on everyday luxuries.
“Fry attachment rates have remained fairly stable,” Chief Executive Thomas Werner said on the company’s earnings call Thursday. “The last two or three years have been above historical levels.”
It’s just one example of consumers continuing to buy amid growing reasons to tighten their wallets, a phenomenon that has baffled economists.
Perhaps economists should consider “fry attachment rates” ahead of Friday’s jobs report. The latest data showed that non-agricultural employment increased by 303,000 in March. That was well above the 200,000 estimate by economists surveyed by Dow Jones and provided the latest sign of a strengthening economy.
U.S. retail and food service spending topped $700 billion in February, according to statistics Advance and adjusted government data. February was about 1.5% higher than the same period last year. That’s a whopping 38.5% increase compared with February 2019 – widely considered the last month before the coronavirus pandemic rocked nearly every aspect of the economy.
In the early days of the Covid-19 crisis, rising wages and fiscal stimulus swelled bank accounts, prompting an increase in purchases. But in recent years, U.S. consumers have felt growing pressure due to runaway inflation, rising interest rates and the end of pandemic-era economic benefits.
Experts are surprised by Americans’ unwavering propensity to use cash, despite declining consumer confidence and growing fears of a recession. The option to add fries provides a case study in what some refer to as “YOLO” or “revenge” spending, the first term being named after the acronym “You only live once.”
Slowdown elsewhere
To be sure, there are signs that financial stress faced by consumers is affecting money decisions around food. WK Kellogg CEO Gary Pilnick told CNBC earlier this year that cereal is trending as a dinner replacement as shoppers grapple with higher grocery costs.
Werner said that while French customers still opt for French fries, Lamb Weston’s sales have still taken a hit due to overall lower traffic at the restaurants it serves. The executive said the decline is because consumers have grown accustomed to higher prices for menu items due to inflation. (Lamb Weston supplies potatoes to large chains, e.g. McDonald’s and Chik-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 dining out less frequently.”
Lamb Weston on Thursday reported fiscal third-quarter adjusted profit and revenue that fell short of expectations of analysts polled by FactSet. The Idaho-based company’s full-year outlook on two financial measures also fell short of Wall Street forecasts.
The stock fell more than 19% during trading Thursday, hitting a low not seen in more than a year.
