Shoppers Pay More, Visit Less: Who Still Has Pricing Power

American consumers are still spending, but they are doing it in fewer trips. The Fiserv Small Business Index for September, released on Monday, Oct. 5, showed average tickets up 4.2% year over year at the small businesses it tracks, while total transactions fell 2.0%, the eleventh straight monthly decline in foot traffic, according to Fiserv's release distributed by GlobeNewswire. Higher prices are doing the heavy lifting, and brands that can keep raising them without losing customers are getting scarce, a strain Affirm CEO Max Levchin also flagged when he said high gas prices are straining U.S. shoppers.

Restaurants Lose Visits Even as Checks Climb

Dining out shows the trade-off most clearly. Fiserv said sales at food services and drinking places fell 1.0% as transactions dropped 3.9%, more than offsetting a 2.8% rise in average tickets. Limited-service restaurants fared worst, with sales down 4.0% and transactions down 5.6%, while full-service restaurant sales edged up 0.8% and drinking places rose 5.3%. That echoes the survey TradeFlock covered last week on diners changing what and how they order.

McDonald's has become the clearest casualty. Its shares fell below $230 on Monday for the first time in more than four years, Yahoo Finance reported, after Guggenheim analyst Gregory Francfort said he wants to see franchisees buying into entry-level value menu efforts or operational improvements that can drive traffic. Yahoo Finance also cited an Evercore ISI estimate that U.S. same-store sales fell 1% in the summer quarter. Chief Executive Chris Kempczinski had already warned of flat traffic and persistent inflation at the Sept. 23 investor day. Pricing is now a legal issue too: Reuters reported on Monday that McDonald's has been sued in federal court in Chicago in a proposed nationwide class action alleging it coordinates menu prices across franchised and company-owned restaurants through an AI-powered pricing system. McDonald's denied the claims, saying AI does not set the price of a Big Mac.

The pressure runs upstream. Fry supplier Lamb Weston said on Tuesday that North American volume rose 7% in its fiscal first quarter while price/mix fell 2%, citing "price and trade support for customers" and a shift toward chain and private-label business, according to its Business Wire release. Net sales rose 1% to $1.67 billion, and the shares rose 3.5% after the company beat estimates and raised its outlook, Investing.com reported.

Texas Roadhouse Is the Traffic Bet

Evercore ISI upgraded Texas Roadhouse to Outperform from In Line while cutting its price target to $200 from $220, TheFly reported on Monday, after a roughly 25% pullback in the shares. Investing.com reported that Evercore sees a return to traffic growth above 2% as the key catalyst, and noted second-quarter same-store sales rose 6.2%, with 3.0% coming from more guests. Visits rising alongside checks is what pricing power looks like, in contrast to Olive Garden, whose parent Darden reported slower growth last month.

Walmart Widens Its Grocery Price Gap

In grocery, the price gap is the product. A Goldman Sachs survey of 38 items at six retailers, conducted on Monday, found Walmart's prices 15.7% below the group average, wider than 13.4% below in September, Investing.com reported on Tuesday. Dollar General ranked second at 7.0% below average, while Whole Foods sat 10.9% above and Sprouts Farmers Market 9.8% above. At the pump, Fiserv said gas station tickets rose 20.9%, but transactions were nearly flat at 0.2% and inflation-adjusted gas sales fell 5.0%.

The Staples Brands That Can Still Charge

Investors are rewarding packaged goods makers that can still grow. Evercore ISI upgraded Procter & Gamble to Outperform on Monday with a $166 target, Investing.com reported, lifting its first-quarter organic sales growth estimate to about 3% against a 2% consensus. Trademark Coca-Cola volume rose 5% in the second quarter, its fastest gain in 17 years outside the pandemic recovery, according to a Motley Fool analysis published Monday by The Globe and Mail, which noted the gain came after years of price increases.

Where Wallets Are Still Opening

Discretionary spending has moved rather than vanished. Fiserv said discretionary sales rose 2.0% even as discretionary transactions fell 2.2%, sporting goods retailers posted a 10.4% increase, pet spending has held up as cat owners spend more, and clothing foot traffic rose 6.1% while average clothing tickets fell 4.7%. Online, Adobe expects $9.9 billion in U.S. spending during Amazon's Prime Big Deal Days on Oct. 6 and 7, up 9.2% from last year's event, with discounts peaking at 19% below list price, MediaPost reported on Tuesday. Lenders are still backing small indulgences, too: candy chain IT'SUGAR secured an $8 million revolving credit facility from Second Avenue Capital Partners, according to a PR Newswire release on Tuesday, Oct. 6.

Volume, Not Price, Now Separates Winners

Growth built on price alone is eroding, most visibly at limited-service restaurants, where transactions fell 5.6% even as average tickets across restaurants and bars rose 2.8%. Brands that grow volume, from Coca-Cola's 5% second-quarter trademark volume gain to the 3% organic growth Evercore expects at P&G, still have room to charge, while Walmart is widening its 15.7% grocery price gap to compete for the trips that remain. With sentiment already weak after the September consumer outlook plunged, shoppers will pay more per trip only when the trip feels worth it, and they are making fewer of them.