As Gas Prices Climb, Which Companies Will Lose?

Road trips may not be the only thing Americans are cutting back on this summer, due to rising gas prices.

The Energy Information Administration expects gas prices to rise 33 cents a gallon by summer, up to $2.74 as the national average between April and September. Already the national average is the highest it’s been since 2015. This could be bad news for retailers and consumer companies, sources say, as shoppers are projected to cut back on discretionary spending to make up for higher costs at the pump.

“Every penny rise generally takes out billions of dollars from the economy in other avenues, and discretionary spending is always the first to take a hit,” said Patrick DeHaan, a senior petroleum analyst with GasBuddy.

In other words, companies in the dining, entertainment and retail sectors could see sales decline. Airlines could also see a dent in their bottom lines, as jet fuel will be more expensive amid an especially competitive market.

These are the companies that see their profits hit thanks to rising gas prices, and the stocks that could letdown investors.

1. The Olive Gardens of the World

Casual dining giants like Olive Garden’s parent Darden Restaurants Inc. (DRI) , Dine Brands Global Inc. (DIN) , the company behind Applebee’s and IHOP, and Chili’s owner Brinker International (EAT) “tend to suffer” in these times, DeHaan said.

“These restaurants lose sales over fast food and fast casual, which become more popular because of their lower prices,” he explained. “Instead of paying $20 for an entree at Olive Garden, people are opting for a $10 Chipotle meal.”

Watch Dine Brands new CEO Steve Joyce discuss the company’s outlook below with TheStreet’s Executive Editor Brian Sozzi below.

2. Dollar Stores

“Retailers are affected both directly and indirectly by higher gas prices because you have to consider how fewer people will be driving to malls to instead shop online,” said John Cui, a professor at Georgetown University’s McDonough School of Business, who specializes in consumer research.

In other words, not only is discretionary spending going down but retailers that disproportionately rely on brick-and-mortar traffic will be especially hurt  and that includes Dollar Tree Inc. (DLTR) and Dollar General Corp. (DG) .

These dollar stores are also more vulnerable because of their customer demographics.

“Their customers are likely to be especially sensitive to the price increase of gas,” Cui said. Dollar General, for instance, specifically cater to households that earn $40,000 or less.

3. The Movie-House Giants It’s going to be a rough scene ahead for AMC Entertainment Holdings Inc. ( AMC) and Regal Entertainment Group ( RGC) . Movie theaters will likely see a dip in customer traffic, DeHaan said, as consumers forego regular entertainment options.
4. The Already-Ailing Airline Sector

American Airlines Group (AAL) , United Continental Holdings Inc. (UAL) and Delta Air Lines Inc. (DAL) just can’t catch a break. Beyond bearing the cost of rising jet fuel prices, these companies must remain competitive and face the pressure of keeping tickets cheap for customers.

“Airlines will probably bear the brunt of the cost without raising prices for tickets,” DeHaan said. “This means their revenue will be hurt in the long run.”

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