McDonald's CEO Chris Kempczinski says lower-income consumers are eating at home and finding other ways to save money.
McDonald's reported its first drop in global sales in more than three years as inflation-weary consumers seek cheaper options and cut back on eating out.
McDonald's global sales fell 1 percent in the April-June period, the fast-food giant said Monday, the first drop since the final quarter of 2020, when the COVID-19 pandemic and government restrictions shut down businesses and kept millions of people at home.
Outlets in so-called licensed international development markets, which are operated by licensees, saw a steeper decline, with sales falling 1.3 percent amid weak consumer sentiment in China and boycotts in the Middle East over the fast-food chain's perceived support for Israel.
McDonald's chief executive Chris Kempczinski said consumers had become “very selective” with their spending after previously benefiting from consumers “switching from more expensive restaurants” to the fast-food chain.
“We're seeing prices falling, but what we're seeing is that the loss to low-income consumers is greater than the benefit of the decline,” Kempczinski said on a conference call with investors.
“What we are seeing is that, in many cases, low-income consumers are leaving the market, eating at home and looking for other ways to save money.”
Kempczinski said that while customers still recognise McDonald's as the best value fast-food chain, the “value leadership gap” with its rivals has narrowed.
“We are working to resolve that at pace,” he said.
Executives said a $5 meal deal launched in June had sold out ahead of expectations and the promotion would be extended at most U.S. outlets beyond August.
“We are determined to revive equity growth in all of our core markets, regardless of prevailing market conditions. This will not happen overnight, but it will happen,” Kempczinski said.
Despite the lackluster results, McDonald's shares rose 4.5 percent on Monday morning as investors appeared to be convinced by the fast-food chain's plans to secure its fortune.
