MW The spike in gas prices might affect Olive Garden sales, but not in the way you'd expect
By Bill Peters
Olive Garden parent Darden Restaurants reports earnings this week amid concerns over rising oil prices and a strike at a large U.S. meatpacking plant
Darden Restaurants reports quarterly results on Thursday.
With Olive Garden parent Darden Restaurants and several retailers set to report earnings this week, Wall Street will be focused on the effects of rising oil and gas prices on consumers' wallets amid the intensifying conflict in Iran. But one analyst says the impact, at least for restaurants, might not be what you think.
BTIG's Peter Saleh said that after looking at years of data on gas prices, same-store sales and foot traffic, he found little evidence that higher gas prices kept people from going to restaurants.
Saleh, in a note on Tuesday, said he was "watching commodity inflation" ahead of Darden's results, given the recent spike in oil prices and a strike that began this week at a large U.S. meatpacking plant. But in a separate note, dated Friday, he downplayed the impact of rising gas prices on restaurants overall.
"We believe too much emphasis has been placed on the correlation between rising gas prices and the impact on restaurant traffic," Saleh said.
"In our view, there may be a psychological threshold when gas prices breach $4 or $5 per gallon in certain geographies, resulting in a short-term consumer retrenchment," he added. "However, that is anecdotal, as the data over the past two decades does not support the thesis that rising gas prices negatively impacts industry traffic."
According to AAA, the national average gasoline price per gallon rose to $3.790 from $2.917 a month ago. The state with the highest gas prices is California, with an average of $5.542 per gallon.
A perfect, direct connection between rising gas prices and falling sales and traffic would result in a correlation of -1.0, he said. But his analysis suggests the actual correlation between changes in gas prices at the pump and same-store sales since 2012 is +0.52.
"While it's not a very strong or convincing data point, we highlight that it's positive, and implies if anything the two factors move in the same direction, not opposite," he said.
They found similar results at McDonald's $(MCD)$, as lower-income consumers have been stretched by higher prices more than their wealthier counterparts, and at Texas Roadhouse $(TXRH)$.
"In our view, gas prices are just one factor, but not a determining factor when assessing the health of the consumer and the willingness to dine out," Saleh said.
Darden's $(DRI)$ earnings, due Thursday, will arrive as restaurants grapple with inflation-weary consumers and the resulting discount war that has drawn in fast-food and sit-down chains alike over the past year. McDonald's in February said its efforts to offer cheaper deals had brought customers back. But like some other chains, it signaled that this year would be difficult.
Saleh, in the note on Tuesday, said Darden "continues to play offense relative to competitors." And he said that things like higher tax refunds could help boost consumer spending at restaurants this year.
But along with rising oil prices, he noted that a two-week strike that began Monday at a large Colorado meatpacking plant owned by meat-processing giant JBS $(JBS)$ could add to the potential disruptions to the beef supply chain and push meat prices higher. Tyson Foods $(TSN)$ also plans to close a large beef-processing facility in Nebraska.
Nearly 3,800 workers were on strike at the Colorado plant, according to a statement from the United Food and Commercial Workers Local 7 union. The workers are seeking pay raises that keep up with inflation and "stable health care costs."
-Bill Peters
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March 17, 2026 15:54 ET (19:54 GMT)
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