McDonald's plans to boost deals and send out a value message to combat sluggish sales.
The Chicago burger giant said customers weary of inflation are eating out less frequently in many large markets. In the first quarter, fast food visits were flat or down in the United States, Australia, Canada, Japan, the United Kingdom, and Germany.
“Consumers are certainly very discriminatory in how they spend their money,” McDonald's President and CEO Chris Kempczinski said on a conference call with investors on Tuesday. “While this may be more pronounced for lower-income consumers, it is important to recognize that all income groups are looking for value.”
McDonald's announced that same-store sales, or sales at stores open for at least a year, rose 1.9% worldwide in the January-March period. That was below the 2.1% increase expected by Wall Street, according to analysts surveyed by FactSet.
mcdonalds warned investors It is thought that the extraordinary growth seen after the pandemic is likely to slow this year. Lower food prices have led many consumers to eat more meals at home. Still, the same-store sales growth rate the company posted in the first quarter was lower than the 3% to 4% that McDonald's typically sees in previous years.
In the U.S., same-store sales rose 2.5% in the first quarter, largely due to price increases carried over from last year.
Kempczinski checked the McDonald's app during the call and noted several deals were available in his area, including one Big Mac for 29 cents. Kempczinski also said that 90% of U.S. restaurants offer set meals for $4 or less.
But Kempczinski said McDonald's needs a national value message and marketing to back it up. In some areas, he said, the company is losing out to competitors in customer perceptions of value and affordability. Wendy's, for example, currently offers free fries with the purchase of a medium burger.
“There's a lot of great value there, but others have valuable messages as well,” Kempczinski said.
Overseas, the situation is not so bright. In McDonald's overseas franchise market, same-store sales fell 0.2% in the first quarter as customers in Muslim-majority markets such as the Middle East, Indonesia and Malaysia boycotted McDonald's because of its support for Israel. This is the first time since 2020 that the division's quarterly same-store sales have declined.
The boycott began in October after McDonald's Israeli franchisees announced they would provide free meals to Israeli troops involved in the Gaza war. McDonald's has sought to limit the fallout. In early April, the company Announcement of acquisition of Aryonal Limited, an Israeli franchisee that has taken over 225 restaurants in the country. Financial terms of the deal were not disclosed.
Kempczinski said the impact of the boycott does not appear to have worsened, and some markets are still seeing demand for delivery. But McDonald's expects the boycott to continue for some time.
“We do not expect this effect to improve significantly until the war is over,” he said.
McDonald's announced that its sales for the January-March period rose 5% to $6.17 billion. This was in line with Wall Street expectations.
Net income increased 7% to $1.93 billion. Earnings, adjusted for restructuring costs, were $2.70 per share. The price fell short of analysts' expectations of $2.72.
McDonald's stock was flat in Tuesday morning trading.
