McDonald’s sales fall for the first time in years

McDonald’s reported a surprise fall in sales in the April to June quarter – as customers cut down on trips to the fast food giant. Americans placed fewer orders than a year ago – meaning sales were down by nearly one percent. Globally, sales fell by a similar amount.

McDonald’s saw fewer customers, but it said those who came spent more because of price increases. It was the first sales decline since 2020 when the pandemic shuttered stores and millions stayed home. Profits also slumped by 12 percent.

Big price rises – including fan favorites like a Big Mac meal hitting $17.59 – are blamed for customers staying away. ‘The biggest hit for McDonald’s is the low-income consumer has really cut back on visits and that is more than offsetting the typical trade down [the chain] normally sees in tougher economic times,’ said Edward Jones analyst Brian Yarbrough.

McDonald’s results dovetail with comments last week from Coca-Cola CEO James Quincey, who said sales were slow in restaurants – an indication of fewer people eating out. McDonald’s also reported lower store traffic in China, France and the Middle East, where people have been boycotting McDonald’s because of a perception that it supports Israel in the war in Gaza.

CEO Chris Kempczinski (pictured) said there is a lot more deal-thinking from consumers who have become ‘very discriminating’. ‘Consumer sentiment in most of our major markets remains low,’ he said. McDonald’s had warned in April that more of its inflation-weary customers were seeking better value and affordability.

As a result, the Chicago burger giant introduced a $5 meal deal at US restaurants – either a McChicken or McDouble, four-piece chicken nuggets, fries and a drink – on June 25. That offer was only live for about a week of the financial reporting period – so its effects will be seen in the next quarter. At first introduced for four weeks, the $5 deal has been extended through the rest of the summer at most of its restaurants. McDonald’s President Joe Erlinger says it has boosted sales.

Generally, chains are reeling from falling customer numbers as Americans fed up with two years of price rises stay away – so are rolling out all these offers. Burger King’s $5 Your Way Meal – offering four items like McDonald’s – was the first to hit restaurants in June. Wendy’s has a $3 breakfast offer and also a four-item $5 meal similar to McDonald’s and BK’s.

Starbucks also made a surprise entry into the value war with a coffee and food breakfast combo from $5. Quarterly revenue for McDonald’s was flat at $6.5 billion and just off the $6.6 billion that Wall Street was expecting, according to analysts polled by FactSet. Opening of new restaurants offset the slight fall in same-store sales.

Excluding one-time items such as restructuring charges, McDonald’s earned $2.97 per share. That was far from the per-share profit of $3.07 that industry analysts had forecast. McDonald’s shares initially fell in premarket trading but then rose after the market opened – as investors weighed up a more promising outlook for the rest of the year. As of Friday’s close, shares were down 15 percent in the past year.

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