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McDonald’s has struggled to attract cash-strapped customers amid rising menu prices, leading to its first sales decline in years.
McDonald’s CEO Chris Kempczinski said the company’s system has “endured significant inflationary cost increases” over the past few years, ranging from 20 percent to 40 percent depending on the market.
“As we work with our franchisees to absorb these increased costs, we are exploring ways to protect restaurant profitability through productivity initiatives and selective price increases,” Kempczinski said. “These price increases have disrupted long-standing value programs and caused consumers to rethink their purchasing habits.”
Global sales fell 1% in the second quarter, the first decline in 13 quarters, according to LSEG data, compared with analysts’ average forecast of a 0.53% increase.
Fast food chains such as McDonald’s and Burger King have launched several promotions to boost foot traffic and reverse declining sales amid rising inflation.
McDonald’s extends $5 meal deal at most U.S. restaurants
McDonald’s on Monday reported an unexpected drop in sales and quarterly profit that fell short of Wall Street expectations. (Jakub Porzycki/NurPhoto via Getty Images/Getty Images)
The bargain-set battle has intensified after rivals Burger King, Wendy’s and Starbucks rolled out bargain set menus in recent months.
McDonald’s had planned to extend its $5 meal offer at most U.S. locations through August after it began on June 25.
The company said the deal has been a big success at restaurants in upstate New York, for example, with lower-income consumers “driving overall sales growth.”
Kempczinski was not satisfied with the company’s value execution, which he said contributed to the company’s poor performance.
“The mark of a great company is the ability to perform in good times and bad. We are determined to once again accelerate our share growth in all our key markets, regardless of current market conditions,” Kempczinski added.
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Despite consumers becoming more cautious with their spending, McDonald’s kept its 2024 operating margin forecast unchanged in the mid- to high-40s range.
The company’s shares have fallen 15% this year but rose slightly in premarket trading after the company maintained its capital spending budget at up to $2.7 billion.
More than half of the funds will be used to open new restaurants in the U.S. and international markets.
U.S. same-store sales fell 0.7% in the quarter that ended June 30, after rising 10.3% in the same period a year ago. Sales in international markets fell 1.1% due to a slowdown in France.
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A slower-than-expected recovery in China and conflict in the Middle East hurt performance in McDonald’s business units where restaurants are operated by local partners, with sales falling 1.3 percent after growing 14 percent a year earlier.
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| SBUX | Starbucks Corporation | 74.92 | +0.87 |
+1.17% |
McDonald’s reported second-quarter adjusted earnings of $2.97 per share, below the $3.07 expected.
Reuters contributed to this report.
