Arcos Dorados Holdings Inc. ARCO is likely to benefit from continued digital transformation, loyalty program expansion and its robust Experience of the Future (EOTF) restaurant modernization. This, and a focus on the loyalty program, bodes well. However, challenging macroeconomic conditions remain a concern.

Growth Catalysts for ARCO Stock

The company’s strategic “Four D’s” — Digital, Delivery, Drive-thru and Development — continue to serve as key growth drivers. In 2024, digital sales rose 18% year over year in U.S. dollar terms, with mobile app transactions and loyalty-driven purchases gaining traction.

ARCO remains committed to modernization and expansion. In 2024, it opened 85 EOTF restaurants and upgraded more than 150 existing ones, pushing EOTF’s penetration to 67% of its portfolio. In 2025, the company plans to open 90-100 new EOTF restaurants and invest between $300 million and $350 million in capital expenditures. Management aims to expand this to at least 90% by 2027.

In Brazil, digital channels accounted for nearly 70% of sales in the fourth quarter, reflecting the country’s robust adoption of app-based ordering and loyalty rewards. Marketing campaigns like “Mequi Friday” and localized menu offerings helped boost guest engagement and average check sizes. Meanwhile, ARCO continues to grow its share by focusing on affordability platforms and value-driven menus in markets like Mexico and Panama.

Arcos Dorados’ loyalty program experienced significant growth, adding 12.6 million new members in 2024 and ending the year with a total of 15.8 million registered users. This initiative has consistently driven higher guest frequency and average check sizes. By the end of 2024, the program was active in Brazil, Costa Rica and Uruguay, contributing 18% of fourth-quarter sales in those markets. In early 2025, the company rolled out the loyalty program in Argentina and Colombia and received strong customer engagement. It plans to expand the program across all its markets by late 2025 or early 2026.

Concerns for Arcos Dorados Stock

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In the past six months, Arcos Dorados’ shares have lost 24.9% compared with the industry’s 4.6% fall. The downside was due to macroeconomic headwinds and shifts in consumer sentiment. It anticipates comparable sales growth in the first quarter to be soft, owing to transitory challenges that are broadly affecting consumer-facing businesses in Latin America.

Among the factors contributing to this expected softness is the comparison against a leap year, which creates a tougher year-over-year benchmark. Additionally, weaker currency levels in many of the company’s core markets are expected to weigh on reported results during the quarter. Geopolitical uncertainty, particularly in Mexico, is also dampening consumer sentiment.

ARCO’s Zacks Rank & Key Picks

Arcos Dorados currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Zacks Retail-Wholesale sector are Sprouts Farmers Market, Inc. SFM, BJ's Restaurants, Inc. BJRI and Cracker Barrel Old Country Store, Inc. CBRL.

Sprouts Farmers currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sprouts Farmers delivered a trailing four-quarter earnings surprise of 15.1%, on average. The stock has gained 37.1% in the past six months. The Zacks Consensus Estimate for Sprouts Farmers’ 2025 sales and earnings per share (EPS) indicates a rise of 11.9% and 24.3%, respectively, from the year-ago period’s level.

BJ's Restaurants currently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter negative earnings surprise of 84.7%, on average. The stock has declined 7.5% in the past six months.

The Zacks Consensus Estimate for BJ's Restaurants’ 2025 sales and EPS indicates growth of 3.2% and 12.9%, respectively, from the year-ago period’s levels.

Cracker Barrel currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 22.5%, on average. The stock has declined 7.5% in the past six months.

The Zacks Consensus Estimate for Cracker Barrel’s 2026 sales and EPS indicates a rise of 2.3% and 13.8%, respectively, from the year-ago period’s level.

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This article originally published on Zacks Investment Research (zacks.com).

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