McDonald’s U.S. sales miss highlights rising consumer anxiety

The burger giant said it will continue to offer value meals starting at US$5, a signature part of the chain’s efforts to bring in customers looking for affordable options. Photo by Gene J. Puskar/Associated Press/Postmedia files

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Same-store sales slumped 3.6 per cent in the U.S., according to a statement Thursday, mainly because of a decline in guest counts. It’s the biggest drop in the chain’s home market since the second quarter of 2020, when the pandemic kept diners at home.

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Shares fell about two per cent at 9:30 a.m. in New York. The stock has advanced 10 per cent so far this year through Wednesday’s close, versus a 5.3 per cent decline for the S&P 500 Index over the same period.

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The results suggest that McDonald’s focus on affordable menu options, coupled with temporary offerings, haven’t been enough to help customers overcome anxiety sparked by a trade war that’s already led to higher prices for some products. McDonald’s had previously warned that low-income consumers were struggling, and chief executive Chris Kempczinski said Thursday that middle-income clients had also come under pressure.

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Consumers “are grappling with uncertainty,” Kempczinski said in the company’s statement. Even so, McDonald’s is confident it can “navigate even the toughest of market conditions and gain market share,” he added. A slump in consumer sentiment also contributed to weak results at Chipotle Mexican Grill Inc. and Starbucks Corp.

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Global sales at locations open at least 13 months fell one per cent from the prior year, missing the average estimate of analysts polled by Bloomberg. Earnings per share, excluding some items, were roughly in line with expectations.

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Weakness in the UK hurt results in one of the company’s international divisions.

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“In most of our major markets, we’re seeing a similar story in regards to the challenging industry environment and softening consumer sentiment,” chief financial officer Ian Borden said in the company’s earnings call.

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In McDonald’s other international unit, same-store sales rose 3.5 per cent, powered by growth in the Middle East and Japan. Results for that segment took a hit a year ago in part due to boycotts against American brands after the outbreak of the Israel-Hamas war. The business will likely be impacted until the conflict ends, McDonald’s warned Thursday in a regulatory filing.

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Improving Trends

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Third-party data suggest that U.S. trends have improved in April, thanks in part to the launch of a limited-time Minecraft meal. Some analysts are optimistic that new products such as the chicken McCrispy strips and the return of Snack Wraps could drive sales in the future. The company will also launch a beverage test, inspired by its CosMc’s spinoff, in the U.S. at some existing McDonald’s restaurants.