Lovin' it less? McDonald's sales see first decline since 2020
McDonald's has experienced a drop in sales for the first time since 2020, according to its second quarter report. The fast-food giant's comparable sales, a metric which tracks restaurants open for over a year, fell by 1% from the previous year. This downward trend was consistent across all of McDonald's geographic segments and was particularly noticeable in the US due to decreased foot traffic.
McDonald's stock remains stable despite sales slump
Despite the reported sales decline, McDonald's shares remained relatively stable in early trading in New York. However, there has been a 15% decrease in McDonald's stock value this year as of Friday's close. This contrasts with a 14% gain for the S&P 500 index during the same period, highlighting the fast-food giant's underperformance in comparison to broader market trends.
McDonald's Q1 earnings fall short of analyst expectations
McDonald's reported earnings of $2.97 per share in the first quarter, excluding some items, which fell short of the average analyst estimate. Despite this setback, the company has maintained its guidance for new store openings and operating margin. This comes as McDonald's sales growth has slowed this year due to customers worldwide cutting back on purchases like Big Macs amid years of price increases and tight household budgets.
McDonald's CEO emphasizes value amid slowing sales
In response to the sales slowdown, McDonald's launched a $5 meal deal in the US at the end of last quarter. CEO Chris Kempczinski stated that the chain will continue focusing on "reliable, everyday value" as customers become more discerning with their spending. Other strategic priorities for McDonald's include enhancing its chicken lineup and loyalty program, as part of its efforts to maintain affordability and customer loyalty.
International boycotts, reduced traffic impact McDonald's sales
Internationally, boycotts over the Israel-Hamas war have negatively affected McDonald's sales in regions including the Middle East. The company had previously warned that this slump would continue until the conflict is resolved. Additionally, declines in same-store sales were reported in China and France. System-wide sales, which include business at new restaurants, also declined, indicating that new openings are not compensating for weakness in existing units.
McDonald's expansion plan unfazed by sales decline
Despite the decline in system-wide sales, McDonald's is pursuing an ambitious expansion plan. The company aims to have 50,000 locations worldwide by 2027, up from about 42,000 at the start of this year. This expansion strategy comes even as new restaurant openings have not been able to offset the weakness in existing units' performance.
