May 26, 2024

A Big Mac and fries doesn’t appear to be capturing the attention of consumers for now. Shares of McDonald’s fell slightly in early hours, trading at $272 after it reported its first quarter earnings.

The fast food chain posted lower-than-expected sales for the period. That slowdown was in part due to consumers in the U.S. tightening their wallets —and others waging boycotts related to the Israel-Hamas war.

Buyers holding tight

“As consumers are more discriminating with every dollar that they spend, we will continue to earn their visits,” said Chris Kempczinski, McDonald’s CEO, in the company’s earnings release.

Chicago-based McDonald’s generated revenue of $6.17 billion, about $2.66 earnings per share during the first quarter.

Like other chains, McDonald’s finds itself looking to capture the attention of cash-strapped consumers all over the world. That’s been tough as stubborn inflation drastically alters how consumers spend, especially those from lower-income households that earn less than $45,000 a year.

And McDonald’s has felt that financial ricochet. The chain raised menu prices by 10% in 2023. For the quarter, McDonald’s reported sales in the U.S. grew by only 2.5%. That’s in part due to the higher menu prices which boosted the average check size, the company said in its earnings report. It noted that marketing campaigns, growth in its digital segment, and delivery also buoyed sales.

Israel-Hamas conflict continues

Overseas, McDonald’s said demand for its international developmental licensed markets fell by 0.2%. That slowdown may in part be tied to the company’s purchase of all of its restaurants in Israel in April as it dealt with “the continued impact of the war in the Middle East,” it said in its earnings report.

But even so, those headwinds aren’t stopping McDonald’s. In early February, Ian Borden, McDonald’s chief financial officer, told investors that even though some consumers are simply choosing to eat at home instead of dining out, the fast food chain has been working on ways it can get customers back.

In March, Borden appeared to be making good on that promise with the launch of a pilot program the chain had dubbed a new growth strategy. As part of the three-part plan, McDonald’s said it would make its burgers bigger, increase its chicken supply, and refine its coffee experience.

Later that month, McDonald’s said it would be expanding its partnership with Krispy Kreme to offer three types of the chain’s doughnuts by the end of the year.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *