McDonald’s Warns That Consumer ‘Anxiety’ Could Hit Results

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(Bloomberg) — McDonald’s Corp. is reeling in diners with souped-up value offerings and bigger burgers, but it’s warning that worsening consumer sentiment will dampen second-quarter results.

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After reporting a strong start to the year, the chain cautioned that it expects “meaningful deceleration” in the current quarter due to a run-up in gas prices caused by the war in Iran, as well as comparisons to a successful promotion last year. There’s “heightened anxiety” among consumers, McDonald’s Chief Executive Officer Chris Kempczinski said Thursday on a call with analysts. 

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McDonald’s is banking on new products, such as its recently launched beverage lineup and a forthcoming Red Bull-infused energy drink assortment, to cushion the blow. Value also remains at the forefront. McDonald’s is highlighting several items under $3, such as the Sausage McMuffin, along with a $4 breakfast combo. 

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“I think we’re in great shape on value and affordability now,” Kempczinski said. “Because of the operating environment that we’re in, thank God we’ve got that in place.”

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McDonald’s shares rose less than 1% at 9:47 a.m. in New York on Thursday, paring earlier gains. The stock has fallen 7% this year to date, as of Wednesday’s close. 

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In the US, bigger orders bolstered sales in the first quarter, with the company pushing “Extra Value” meals that have brought in low-income consumers, Kempczinski said. A “hearty” burger called the Big Arch, which cost as much as $10 in some New York and Chicago restaurants, drew in consumers looking for a splurge.

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Revenue of $6.5 billion surpassed the average analyst estimate, and adjusted earnings per share of $2.83 were also higher than expected. 

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Sales at established restaurants rose 3.8% in the first quarter, slightly below the average of estimates compiled by Bloomberg. The results show a rebound from a year ago, when consumer confidence wavered in anticipation of new tariffs by the Trump administration. 

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McDonald’s first-quarter results stand in contrast with Shake Shack Inc., which on Thursday reported revenue that missed the average analyst estimate as inclement weather and a weak consumer backdrop dampened sales. 

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Shake Shack’s stock fell as much as 29% on Thursday after reporting that its profits were hit by higher beef costs, among other expenses. 

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(Adds context throughout and updates share trading.)

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