Generation Z is under financial pressure, and fast-casual chains that thrive among younger consumers are starting to take notice.
“We’ve seen the macroeconomic headwinds really impact the 25- to 35-year-old guest segment, where last year…they had a lot of tailwinds,” Cava (CAVA) CEO Brett Schulman told Yahoo Finance. “Their frequency with existing restaurants has moderated because they felt cost pressures around them.”
Same-store sales growth slowed for the Mediterranean chain in its most recent quarter, rising 1.9% year over year after an 18.1% increase in the same period a year earlier. Cava shares fell more than 7% following the news.
Pressures on America’s youngest consumers include unemployment, which disproportionately affects younger Americans. In August, unemployment among Americans ages 20 to 24 stood at 9.2%, up from 7.9% a year ago, while the overall rate was 4.3%.
Additionally, student loan collections returned in April for the first time since March 2020, and the second-highest amount of student loan debt is held by the 25- to 34-year-old demographic.
In the third quarter, the Federal Reserve Bank of New York found that student loan debt rose $47 billion from a year earlier, while credit card debt rose $67 billion and mortgage debt rose $478 billion.
Read more: 6 Gen Z Savings Strategies That Can Work for Anyone
Other factors include slower wage growth and higher rent. According to JPMorgan Chase, workers ages 25 to 29 have seen the biggest slowdown in income growth, while Bank of America found that “the homeownership rate for those under 35 is significantly lower than for those older.”
For those who rent, rent inflation was 3.5%, according to the latest CPI report published last month.
Chipotle ( CMG ) CEO Scott Boatwright was the first CEO to sound the alarm on Oct. 30 in a call with investors. He said it is “over-indexed” for a “particularly challenged cohort… (those) 25 to 35 years old… This group faces several headwinds, including unemployment, an increase in overdue loan payments and slower real wage growth.” Chipotle shares are down more than 50% this year.
Sweetgreen (SG) last week saw same-store sales decline a staggering 9.5% year-over-year, compared to an increase of 5.6% last year.
In a call with investors, co-founder and CEO Jonathan Neman said performance was affected by “softer sales trends” in the Northeast and Los Angeles markets, which were “coupled with lower spending among younger guests, particularly the 25-35 age group where we overindex.” Sweetgreen shares will fall 80% in 2025.
