McDonald’s (MCCDMcDonald’s on Monday missed second-quarter profit expectations but said its $5 value menu items are attracting lower-income customers as food prices remain high, sending the struggling company’s shares soaring.
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McDonald’s revenue and sales fall
The Dow Jones-indexed burger giant reported earnings of $2.97 per share and revenue of $6.49 billion early Monday, which generally fell short of expectations. McDonald’s profits fell 6% year over year, while sales fell 0.1%, according to FactSet. That was its first profit decline since the third quarter of 2022 and its first sales decline since the fourth quarter of 2022.
Same-store sales fell 1% in the second quarter, the first decline since the fourth quarter of 2020 and below expectations of a 0.4% increase.
$5 meal bundles boost McDonald’s stock price
But management said its new “$5 Meal Deal” has helped boost customer traffic in a tough environment. “We’ve seen an extremely enthusiastic response and sales of our $5 Meal Deal have exceeded our expectations,” McDonald’s U.S. president Joe Erlinger said in an earnings call on Monday.
Notably, Erlinger added, “trial rates for this campaign were highest among lower-income consumers, as sentiment about the brand’s value and affordability is beginning to shift positively.” As grocery and restaurant menu prices remain high, it is lower-income consumers who are being hit hardest.
McDonald’s shares break through key level
The fast-food giant’s shares rose 4.4% to 263.17 on the Dow Jones stock market in heavy trading today.
The stock price broke above its 50-day moving average and above the trend line to hit a two-month high.
However, MCD shares remain below their 200-day moving average and have fallen nearly 12% so far this year.
The burger chain’s shares led the Dow Jones Industrial Average higher on Monday, after the blue-chip index was slightly lower to start the week.
McDonald’s $5 Meal Deal Brings Customers Back
McDonald’s launched the $5 Value Meal on June 25, just a few days before the end of the second quarter.
The company said Monday that it would extend its $5 meal offer, which was scheduled to be available for a limited time in 93% of its U.S. locations, through the summer. McDonald’s says it has been known for its value for more than 70 years.
Starbucks (SBUX), Wendy’s (Wen) Yum Brand‘(delicious) Taco Bell and Restaurant Brands‘(Quick ServiceBurger King has also begun selling combo meals in recent weeks, with both companies hoping to spur consumer demand amid rising food prices.
Wendy’s is scheduled to report earnings on Wednesday and Starbucks on Tuesday. Restaurant Brands and Yum Brands are due to report quarterly results next week.
Four restaurant stocks rose modestly on Monday on hopes for McDonald’s value menu.
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