McDonald’s reports a decline in Q2 sales growth, attributing it to rising gas prices impacting low-income customers
McDonald’s executives on Thursday highlighted a weaker beginning to the second quarter, attributing it to ongoing challenges faced by lower-income consumers due to rising fuel prices. Additionally, the burger chain fell short of first-quarter U.S. sales growth projections.
Executives indicated that increased fuel costs were significantly affecting lower-income diners.
“Elevated gas prices are the central concern we’re facing currently,” CEO Chris Kempczinski stated during an earnings call, noting that inflation at the pump “will disproportionately affect low‑income consumers, and we anticipate that these pressures will persist.”
Shares of the company reduced their premarket gains, increasing by 0.6% in early trading.
In April, comparable sales in both the U.S. and international markets showed a slight decline, and CFO Ian Borden indicated that the company anticipates a “meaningful deceleration” in growth for the second quarter compared to the first quarter.
“I believe it is reasonable to state that the macro environment is certainly not improving and may be deteriorating slightly,” Kempczinski observed.
The company is embracing a renewed value strategy to bolster demand for the rest of the year.
In mid-April, McDonald’s broadened its McValue platform in the U.S., introducing everyday menu items priced under $3, along with a $4 breakfast meal deal. Executives reported that initial indicators following the launch aligned with their expectations.
In the first quarter, U.S. same-store sales growth reached 3.9%, falling short of the anticipated 4.2% increase.
Several U.S. restaurant chains, including Shake Shack, Papa John’s, Wingstop, and Domino’s, have reported weaker quarterly sales growth, attributing this decline to the fallout from the Iran war.
According to Wall Street analysts, lower-income consumers are becoming more discerning, opting for simpler, single-item orders instead of complete meals.
In April, McDonald’s has broadened its McValue platform to attract cost-conscious customers by introducing new $3 and $4 tiers.
Worldwide, McDonald’s comparable sales increased by 3.8%, slightly falling short of analysts’ average expectation of 3.95%. However, this marks an improvement from a 1% decline experienced a year prior.
The company’s total revenue reached $6.52 billion, surpassing estimates of $6.47 billion, as reported by data compiled by LSEG. On an adjusted basis, it achieved earnings of $2.83 per share, surpassing the expectations of $2.74.
