For the first time since 2020, McDonald’s experienced a decline in sales as customers opt for cheaper options while the fast-food giant raise menu prices globally. Grocery store costs have risen more slowly than restaurant prices, despite a decline in inflation.
In a research report, Morningstar equity analyst Sean Dunlop stated, “This shortfall was driven by sluggish traffic, with consumers shifting a larger share of meal occasions towards grocery stores.”
McDonald’s same-store sales in the United States declined almost by 1% between April and June, a fall that management ascribed to difficulties attracting customers, especially the low-income consumers who are cutting back on their spending on food outside the home. The fewer customers visiting their stores are reportedly spending more because of the increased menu prices.
The company’s CEO, Kempczinki, claimed that the cost of labour, paper, and food increased by 40% in some marketplaces in recent years in an effort to defend their higher-priced menu during an investor meeting on Monday.
The April-June period had a 1% decline in sales at locations open for at least a year, the first since Covid 19’s closing of stores in the fourth quarter of 2020, which forced many individuals to stay at home.
McDonald’s also reported decreased customer traffic in France and the Middle East due to boycotts in response to the chain’s alleged support of Israel in the Gaza War. The CEO also noted that in China, consumers are choosing competitors who offer lower prices.
The company stated that while it is working on solutions, such as meal specials and new menu items, same-store sales are expected to decline over the next several quarters.
On June 25, the company launched a $5 meal deal at U.S. restaurants following a warning in April that a growing number of its weary customers were looking for greater affordability and value. This meal deal is reportedly attracting their lower-income customers back and running ahead of expectations, not only in the U.S. but also in the United Kingdom and Germany.
Additionally, according to Joe Erlinger, the company’s U.S. president, 93% of McDonald’s franchisees have consented to continue the campaign through August.
With lower-income consumers switching to more reasonably priced meals at home, McDonald’s and other fast food chains like Taco Bell, Wendy’s, and Burger King are relying more on value meals to draw in customers.
Article by Lena Ndolo
