McDonald’s revealed a startling dip in global sales on Monday, the company’s first decline in 13 quarters, as budget-conscious customers avoid more expensive menu items like Big Macs.
Lower-class customers are being compelled by persistent inflation to switch to more reasonably priced meals at home. As a result, fast food restaurants like Wendy’s, Taco Bell, Burger King, McDonald’s, and Burger King are depending more on value meals to draw in customers.
Chief Executive Officer (CEO) Chris Kempczinski stated that customers are becoming “extremely discriminating” and are thinking strategically more.
“Most of our major markets continue to have low consumer sentiment,” he stated.
Comparable sales globally decreased by 1% in the second quarter, as opposed to the experts’ average prediction of a 0.5 percent rise. Total revenue increased by 1%.
In June, McDonald’s introduced a $5 lunch bargain to the majority of its US outlets. In an effort to win back clients who have cut back on frequent restaurant outings, it was planning to prolong the deal through August.
According to Edward Jones analyst Brian Yarbrough, “the biggest hit for McDonald’s is the low-income consumer has really cut back on visits and that is more than offsetting the typical trade down McD normally sees in tougher economic times.”
The Coca-Cola CEO James Quincey stated last week that there had been “some softness in away-from-home channels” in North America, indicating a decline in the number of people dining out. These remarks and McDonald’s figures align.
Nonetheless, McDonald’s maintained its mid-to-high 40 percent operating margin target for 2024.
The company’s shares, down 15% so far this year, were trading at $251.20. More than half of the company’s projected $2.7 billion capital expenditure budget was set aside for additional restaurants in the US and other countries.
US comparable sales increased 10.3 percent a year earlier, but decreased 0.7 percent in the quarter that ended on June 30.
Due to deterioration in France, sales in outside markets—which accounted for almost half of its income in 2023—dropped by 1.1 percent.
The Middle East war and China’s slower-than-expected recovery negatively impacted McDonald’s business segment, where local partners manage its restaurants. Sales in this area fell by 1.3 percent from a year earlier, when they had increased by 14 percent.
Consumer boycotts related to the Gaza bombing have also hurt businesses like McDonald’s and Starbucks, affecting their revenues in the Middle East markets.
In the second quarter, McDonald’s earned $2.97 per share on an adjusted basis, falling short of $3.07 predicted.
