BREAKINGVIEWS-The K-shaped economy is claiming corporate victims

By Pranav Kiran

TORONTO, Oct 30 (Reuters Breakingviews) - For corporate America, youth appeal is becoming a liability. As older and richer consumers become more and more crucial to keeping up U.S. spending, their poorer or younger peers are falling behind. The problem is big enough that it’s now showing up in the lunch line. Faltering sales at bowl-slingers Cava CAVA.N and Chipotle Mexican Grill CMG.N are an early warning sign.

Consumer spending makes up about 70% of the U.S. economy. That crucial engine has kept humming even amid the cost of erratically shifting tariffs from Washington. Yet overall strength hides diverging paths for America’s different cohorts. Just look at how the top 10% of earners are accounting for more of the pie. They made up nearly half of spending in 2025’s second quarter, rising sharply from about 40% in the 1990s. This K-shaped dynamic appears everywhere: data released by Wall Street titan Citigroup shows that spending on the credit cards that it issues itself has grown in each of the last four quarters. Compare that with cards issued by retailers, which tend to attract those with lower credit scores, where spending has fallen.

The problem is particularly acute for younger Americans, who depend on a vibrant labor-market to job-hop and win raises. While most employers aren’t conducting massive layoffs, they have slowed hiring. The result: even as real income growth slowed to near-decade lows for everyone, workers between the ages of 25 and 29 faced the sharpest decline, JPMorgan researchers found. That’s before even accounting for student loans, where a pause on repayments is ending. For the average borrower, this now costs an additional $100 a month, according to TD Cowen.

This is a big problem for newer restaurants that particularly appeal to young diners. Stocks of firms like Mediterranean Cava and salad-seller Sweetgreen SG.N, which have the highest exposure to customers between the ages of 18 and 24 according to a TD Cowen survey, were among the worst performers over the last year. In contrast, McDonald’s MCD.N and KFC owner Yum Brands’ YUM.N shares have risen slightly.

Click here for an interactive version of the graphic.

It’s notable that the Big Mac purveyor has restrained pricing since the pandemic and introduced value meals. Relatively upscale sellers of bowl meals, like Cava or burrito chain Chipotle, did great in the free-spending exit from the pandemic. Now, their bigger checks are harder to justify: Chipotle shares slumped over 15% on Thursday as it cut sales forecasts for the third time this year. Boss Scott Boatwright specifically called out weakness among late 20s diners. For restaurants as for the rest of the economy, the bowl is increasingly half-empty.

CONTEXT NEWS

Chipotle Mexican Grill on October 29 cut its annual sales forecast for the third time this year, warning that consumer spending on dining out is likely to remain under pressure through early 2026.

The company expects 2025 comparable restaurant sales to decline in the low-single-digit range, compared with prior forecasts that had sales holding roughly flat.

Shares were down 17% in midday trading in New York.