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Key Takeaways
- Low-income consumers have been visiting U.S. McDonald's less frequently for some time, but traffic is now also down among middle-income customers, executives said.
- McDonald's has posted a nearly double-digit decline in traffic from both income groups, the company said Thursday in reporting its latest earnings.
- The burger joint will continue to offer $5 value meal deals until 2025 as a way to entice customers on a budget back.
Executives said that the traffic at McDonald’s (MCD), which caters to low- and middle-income consumers, has decreased as economic pressures spread from these consumers.
In a quarterly conference on Thursday, executives of the fast food giant said that a lack of consumer confidence had impacted their business more than they expected. CFO Ian Borden stated that low-income Americans had been visiting restaurants less since a while. However, traffic among middle-income families was down by nearly double digits compared to the same period last.
Borden, according to an AlphaSense transcript, said that inflation, high interest rate and other economic stressors have been weighing heavily on lower income consumers. "That's spilling over into middle-income consumers right now," he added.
Both Comparable Sales and Revenue declined in the latest Quarter
The comparable sales at U.S. McDonald’s outlets fell 3.6% over the past year in the quarter that ended March 31. This was more than analysts had predicted. The burger chain also missed revenue expectations, reporting sales of $5.96 billion that represented a 3% drop year-overyear.
Chris Kempczinski stated that fewer mornings visits may be a good indicator. "You're seeing people are choosing either to skip breakfast or they're choosing to eat at home,” he said, according to the transcript.
Borden stated that McDonald’s would continue to offer value meals for as low as $5 until 2025. Borden says that McDonald’s has a greater share of low and middle income diners than other restaurants.
McDonald’s shares dropped by almost 2% on Friday. In the past year, they’ve gained around 14%.
