Big brands feeling the pinch as inflated costs drive consumers away

Consumers are under a considerable amount of pressure thanks to years of price increases, and it's putting some of America's popular brands and chains in a tough spot.

A Wall Street Journal report published Sunday said chains like Starbucks, Wendy's and McDonald's are feeling the pinch as consumers drift away from their products as costs remain elevated.

Items that sit on store shelves are also reportedly hanging around a bit longer than they might have before the COVID-19 pandemic, as some of their loyal buyers have reached their breaking point and refuse to dish out any more of their paycheck toward yet another cumbersome grocery bill.

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David Tawil, president of Prochain Capital, echoed the bad news Monday on FOX Business.

"We're seeing the consumer under a considerable amount of pressure. Credit card delinquencies are considerably higher," he told "Mornings with Maria" guest host Cheryl Casone. 

"We're seeing companies that I'd say are in the middle market, of discretionary spending starting to go ahead and show considerable weakness. For instance, we're seeing liquidations of some chain stores like rue21, Sam Ash, the 100-year-old musical instrument retailer, is closing its doors. Ninety-nine cent-only stores are going out of business, then we're seeing some rescue financings at The Children's Place, Jo-Ann Fabrics Express, and I expect that to go ahead and start to widen," he continued.

Rue21, once a popular mall staple, filed for Chapter 11 bankruptcy protection this month, and plans to shutter all its stores and sell all its intellectual property. 

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Sam Ash announced the closure of its locations in a Facebook post on May 2.

Tawil predicted that bigger names around the country will begin to show signs of "hurt," adding that Red Lobster is another company undergoing a "restructuring" right now. This comes as reports allege the restaurant chain is considering filing for Chapter 11 bankruptcy.

Meanwhile, the Wall Street Journal's piece notes that large restaurant chains and food manufacturers are reporting "sliding sales or slowing growth" attributable to consumers' unwillingness to pay the prices that have spiked significantly since before the pandemic.

One California resident, Denis Montenaro, told the outlet he's "done with fast food" after his favorite breakfast order from McDonald's – a coffee with a bacon and egg bagel – totaled $9.67.

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Another former McDonald's customer from the Golden State said the higher costs have compelled him to stop buying, noting that the decision came not from an inability to afford the food, but because he's frustrated that the same meal he used to purchase now costs nearly double.

"The macro headwinds have been more significant than I think we even anticipated coming into the year," McDonald’s Chief Financial Officer Ian Borden said last Tuesday, per the report.

In response to the cutbacks, some popular chains plan to implement different strategies, including new promotions.

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