McDonald’s on Tuesday missed U.S. sales growth expectations for the second quarter as consumers cut back restaurant spending due to economic worries and despite the burger giant’s value deals to draw lower-income diners.
Comparable sales in the largest market for McDonald’s grew 0.8 per cent, below analysts’ estimates of a 1.06 per cent rise, according to data compiled by LSEG. The pace of growth in the U.S. was 2.5 per cent a year ago.
Higher prices for basic goods and fuel have left lower-income consumers with less money to spend on eating out, a key customer base for McDonald’s.
CEO Chris Kempczinski had warned in May that rising macroeconomic uncertainty, including concerns linked to the Iran conflict, was hurting consumer spending.
McDonald’s has spent the past year leaning heavily on affordability and promotions to defend market share against intensifying competition from fast-food rivals, convenience stores and at-home meal consumption.
Its efforts included a revamped McValue platform, an under-US$3 menu, discounted breakfast offers and a broader push into specialty beverages such as refreshers and crafted sodas.
Those initiatives were offset by muted demand and difficult year-ago comparisons, as the company lapped the successful Minecraft-themed meal and Snack Wrap promotions that boosted customer visits.
“While our playbook is working around the world, we see an opportunity to raise the bar in the U.S. and accelerate performance in our largest market,” Kempczinski said.
Globally, comparable sales rose 1.3 per cent, slowing from a 3.8 per cent jump a year ago. Sales in McDonald’s international operated markets segment, which includes major countries in Europe, rose 1.5 per cent, down from 4 per cent a year earlier.
Analysts had expected softer demand in the region as higher energy costs and heatwave conditions curbed spending on dining out.
Sales in its business segment, where restaurants are operated by local partners, slowed to 1.9 per cent from 5.6 per cent a year ago.
Separately, McDonald’s named company veteran Skye Anderson to lead its U.S. business, replacing Joe Erlinger, who is leaving the fast-food chain after more than two decades.
Net income in the second quarter rose 5 per cent to US$2.36 billion. On an adjusted basis, McDonald’s earned US$3.38 per share, up from US$3.19 a year earlier.
