MW Tariffs and GLP-1s are keeping people from dining out. An analyst tries to find the positives.

By Bill Peters

BTIG says there's 'little to no appetite' for restaurant stocks right now, but Wingstop and Chipotle represent 'rare opportunities'

Diners in recent years have struggled with higher prices at restaurants.

Discount wars, tariff concerns and growing access to weight-loss drugs have made for a tough year for restaurant chains. But a BTIG analyst on Wednesday said investors might be treating some chains - like Wingstop Inc. and Chipotle Mexican Grill Inc. - a bit too harshly.

"Our conversations with investors over the past several months suggests little to no appetite for restaurants across the spectrum as discretionary spending in the sector took another leg down late in the summer," BTIG analyst Peter Saleh said in a research note on Wednesday.

"We believe the flow through of tariff pricing in retail during the all important 'Back to School' shopping season may have played a part in the consumer softness in restaurants in September," he said.

He added that he believed that around one-third of the people who used GLP-1 drugs - which include weight-loss medications such as Wegovy and Zepbound - had lower incomes, with yearly household incomes of $45,000 or less. Usage of those medications, he said, has led to far fewer visits to restaurants for a consumer income segment already hit harder by menu-price increases.

Still, he said, he saw hope in restaurants like chicken-wing chain Wingstop (WING) and Mexican fast-casual giant Chipotle $(CMG)$.

Saleh said that investors were "far too bearish" on Wingstop, with shares of the chain down nearly 40% over the past 12 months. Events like the Winter Olympics and the World Cup - which might inspire people to order food while gathered in front of the TV - could make for a better 2026, he said. So could easier comparisons, new digitally oriented kitchen upgrades and the possibility of a new loyalty program.

During an earnings call in July, Wingstop Chief Executive Michael Skipworth said new "smart kitchen" upgrades had been made to 1,000 U.S. Wingstop restaurants and were set to be in all of them by the end of the year. He said restaurants with the upgrade had seen 40% reductions in average ticket times, with stronger sales and delivery times under 30 minutes.

"We are also seeing improvements in all day parts, including our lunch and late-night day parts, which we believe is an untapped opportunity for us," Skipworth said in July.

Shares of Chipotle, meanwhile, are down nearly 30% over the past 12 months. Saleh said the last time investor sentiment on the chain was this bad was during its food-safety crisis roughly a decade ago.

"While we acknowledge that Chipotle lacks specific top-line catalysts, can't (and won't) raise price right now, we see the multiple contraction as far too severe for the environment we are in," Saleh said.

Still, he cut his third-quarter and fourth-quarter same-store sales estimates for Chipotle, citing weaker traffic and limited room for price increases. And he said Chipotle should lean into healthier options, which could help it stand out and draw more people using weight-loss drugs who are eating less.

Diners in recent years have struggled with higher prices at restaurants, which are trying to manage their own cost increases for ingredients and labor. Fast-food chains like McDonald's Corp. $(MCD)$ and Burger King (CA:QSR) are competing more aggressively on value deals to win back customers. Sit-down casual dining chains, including Chili's $(EAT)$, have tried to compete more aggressively on deals as well, putting pressure on fast-casual chains like Chipotle and Cava Group Inc. $(CAVA)$ .

Injectable weight-loss drugs have added their own pressure, Saleh said in the note on Wednesday.

"Our research suggests that 70% of GLP-1 users are visiting restaurants 'less' or 'much less' since starting the medication, and users were most commonly reducing consumption of carbonated beverages, pizza, burgers, and alcohol," Saleh said. "By daypart, snacking was reduced the most (down 58%), while about a quarter of consumers reported reducing consumption at breakfast, lunch, or dinner."

Saleh noted that access to GLP-1 drugs has widened, with compounded offerings from LifeMD Inc. (LFMD) and Hims & Hers Health Inc. $(HIMS)$ that charge as little as $130 per month for the products. Last year, 44% of large employers covered GLP-1s for obesity, up slightly from the prior year, according to consulting firm Mercer.

Medicaid programs in more than a dozen states also cover GLP-1s for obesity, Saleh said, citing information from the Kaiser Family Foundation from last year. Wegovy and Ozempic are sold at Costco Wholesale Corp. $(COST)$.

"In our view, we have not yet reached peak GLP-1 usage," Saleh said.

He later added: "We believe pressure on restaurant industry traffic will continue into 2026 as GLP-1 pills are eventually introduced."

-Bill Peters

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October 08, 2025 14:55 ET (18:55 GMT)

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