McDonald’s global same-store sales fell for the first time in nearly four years in the second quarter as inflation-weary consumers opted for cheaper dining options or chose to eat at home. The company acknowledged this decline and stated that it is working on strategies to address the issue, such as introducing meal deals and new menu items. Despite still being considered a value leader compared to competitors, McDonald’s Chairman, President, and CEO Chris Kempczinski admitted that the company’s value leadership has recently diminished. Sales at locations open for at least a year dropped by 1% in the April-June period, with a nearly 1% decline in the U.S. due to fewer customers and increased menu prices.
The decline in customer traffic is not exclusive to McDonald’s, as U.S. fast-food restaurants experienced a 2% drop in the first half of the year compared to the same period in the previous year, according to market research company Circana. The rising inflation and increasing consumer debt are expected to continue affecting traffic in fast-food restaurants in the second half of the year. McDonald’s also reported lower store traffic in France and the Middle East, and weak consumer sentiment in China as customers are turning to lower-priced competitors. The perception that McDonald’s supports Israel in the conflict in Gaza has led to boycotts in certain regions.
In response to the challenges posed by inflation-weary customers seeking better value and affordability, McDonald’s introduced a $5 meal deal at U.S. restaurants in late June. The company aims to attract lower-income consumers back to its stores with this promotion, which has seen positive performance so far. Other countries like Germany and the United Kingdom are also seeing success with similar meal deals. However, McDonald’s acknowledges the need for a more comprehensive approach to providing value and plans to enhance its marketing efforts to communicate this value proposition more effectively. New menu items, such as the value-oriented Big Arch double burger, are also being tested in select international markets.
For the second quarter, McDonald’s reported flat revenue of $6.5 billion, slightly below analyst expectations of $6.6 billion. Net income fell by 12% to $2 billion, or $2.80 per share, with adjusted earnings of $2.97 per share. This was lower than the forecasted per-share profit of $3.07 by industry analysts. Despite the financial challenges, investors seem optimistic about McDonald’s plans to reverse its sales decline. As a result, McDonald’s shares rose by 4% in morning trading following the announcement of the company’s quarterly results. McDonald’s is focusing on implementing various strategies like meal deals, new menu items, and marketing enhancements to regain its position as a value leader in the competitive fast-food industry.
