What’s going on here?
Krispy Kreme and Jack in the Box served up surprise gains last quarter, outshining an otherwise sluggish period for US restaurant chains.
What does this mean?
The third quarter wasn’t too tasty for most US restaurant stocks, with sales and guest traffic softening after September. The S&P 500 easily outperformed Morgan Stanley’s restaurant sector index, and only food distributors managed to stay in the green. Still, Krispy Kreme soared 33% and Jack in the Box rose 13%, standing out among peers hit by the slowdown. Morgan Stanley chalks up the sector’s dip to the typical business cycle, not a deeper threat—though the group expects more sluggish earnings and softer sales to linger, with fast casual and quick service facing the biggest headwinds. Looking to 2026, the growth outlook is cautious—Morgan Stanley expects no recession, but also no return to the red-hot growth of previous years, keeping restaurants in a holding pattern.
Why should I care?
For markets: Bright spots amid the slowdown.
Krispy Kreme and Jack in the Box’s solid gains shine even brighter against a backdrop of sector-wide underperformance. While many quick-service and casual dining names struggled, these two defied the trend and attracted fresh investor interest. Both stocks built on their momentum recently, with Krispy Kreme up 3.2% and Jack in the Box climbing 4.3% on recent trading days, highlighting selective optimism in the space.
The bigger picture: Business as usual, not a red flag.
Analysts at Morgan Stanley see this patchy performance as a regular part of the business cycle, not a sign of something more serious. Structural demand for dining out looks steady, and with no recession on the horizon for 2026, cautious optimism prevails. Even with some muted ratings and trimmed forecasts, the consensus is for growth to keep rolling, just at a slower-than-typical pace.
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