McDonald’s on Monday reported its first sales drop since the early days of the coronavirus pandemic as the burger giant struggled to draw in cash-strapped customers because of inflated menu prices.
The Chicago-based fast food chain — which rolled out a $5 value meal last month to lure customers — said that its same-store sales in the US fell by 0.7% in the second quarter while revenues were flat, missing analyst estimates of an 0.8% increase.
Last year, US-based same-store sales rose 10.3%. Sales in international markets dropped 1.1%, driven by weakness in France, compared with estimates of a 1.69% growth.
The segment had recorded an 11.9% growth a year ago.
McDonald’s reported revenues of $6.5 billion, up 2% year over year but still short of analyst estimates of $6.63 billion.
McDonald’s earned $2.97 per share on an adjusted basis in the second quarter, lower than last year’s $3.17.
Customers worldwide pared back spending on fast food as prices have soared, according to McDonald’s CEO Chris Kempczinski, who told investors on the earnings call on Monday that consumers were “more discriminating with their spend.”
Kempczinski said that the company was focused on “outstanding execution” in its efforts to offer consumers “reliable, everyday value” while “accelerating strategic growth drivers like chicken and loyalty.”
He expressed confidence that the company’s strategy was “the right playbook for our business.”
Since Jan. 1, McDonald’s share price has dipped by 15%. On Monday, the stock was trading flat before the opening bell.
Persistent inflation has forced lower-income diners to shift to affordable food options at home.
Earlier this summer, McDonald’s rolled out a $5 value meal offering customers a combination of popular menu items such as a burger or chicken sandwich, fries or nuggets and a soft drink.
The popularity of the value deal resulted in an uptick in the number of customers who visited McDonald’s locations in the US.
The initial plan was to offer the promotion for a month, but the company extended the deal after it noticed that it was helping boost foot traffic to its stores.
But some franchisees expressed concern that the promotion would prompt customers to trade down to the cheaper option when some of them were willing to pony up for a more expensive meal, according to Bloomberg News.
Inflation-weary diners have been put off by some of the chain’s soaring menu prices, such as an $18 Big Mac in Connecticut and $7.29 for an Egg McMuffin.
With Post wires