McDonald’s plans to increase deals and value messaging to combat slow sales.
chicago burger giant Said that in many big markets, customers troubled by inflation are eating out less. In the first quarter, fast food traffic was stable or down in the United States, Australia, Canada, Japan, the United Kingdom and Germany.
“Consumers are certainly being very discriminating in how they spend their dollars,” said McDonald’s President Andrew Cuomo. CEO Chris Kempczinski said during a conference call with investors on Tuesday. “This may be more pronounced with lower-income consumers, but it’s important to recognize that all income groups are looking for value.”
McDonald’s said it’s a same-store sale – or sales at the shops Opened in less than a year – grew 1.9% worldwide in the January–March period. That was below Wall Street’s forecast of 2.1% growth, according to analysts polled by FactSet.
McDonald’s warned investors The extraordinary growth seen after the pandemic is likely to slow down this year. Still, the same-store sales growth the company reported in the first quarter was lower than the 3% to 4% growth McDonald’s typically sees in a typical year.
In the US, same-store sales rose 2.5% in the first quarter, but that was largely due to price increases from last year.
Kempczinski checked his McDonald’s app during the call and noted that there were several deals available in his area, including 29 cents for a Big Mac when you buy another. And Kempczinski said 90% of U.S. restaurants are offering meal bundles for $4 or less.
But Kempczinski said McDonald’s needed a nationwide value message and marketing to support it. In some areas, he said, it is lagging behind competitors in terms of customers’ perception of value and affordability. For example, Wendy’s is currently offering free fries with the purchase of a medium burger.
“There are a lot of great values out there, but everyone else also has a values message,” Kempczinski said.
The situation abroad is not looking very good. In McDonald’s international franchise markets, same-store sales fell 0.2% in the first quarter as customers in the Middle East and Muslim-majority markets such as Indonesia and Malaysia boycotted McDonald’s for alleged support of Israel. It was the first time since 2020 that quarterly same-store sales declined in that segment.
The boycott began in October, when a McDonald’s franchise in Israel announced it was providing free meals for Israeli soldiers involved in the war in Gaza. McDonald’s has tried to limit the fallout. In early April, the company said it is purchasing the franchise, Elonal Ltd., and took over 225 McDonald’s restaurants in Israel. Financial terms of the deal were not released.
Kempczinski said the impact of the boycott does not appear to be worsening, and some of those markets are still seeing demand for delivery. But McDonald’s expects the boycott to continue for the foreseeable future.
“We don’t expect to see any meaningful improvement in its impact until the war ends,” he said.
McDonald’s said its revenue rose 5% to $6.17 billion in the January-March period. This was in line with Wall Street estimates.
Net income rose 7% to $1.93 billion. Earnings, adjusted for restructuring charges, were $2.70 per share. That was below analysts’ forecast of $2.72.
Shares of McDonald’s were flat in morning trading Tuesday.
