McDonald's sales slip, company plans to focus on pricing

(NewsNation) — McDonald’s sales fell for the first time in nearly four years last quarter as inflation-weary consumers pulled back on dining out. Company executives say they’re focused on providing better value moving forward.

The American burger giant saw global same-store sales drop 1% from the year prior amid lower U.S. foot traffic and higher prices, the company reported Monday.

McDonald’s CEO Chris Kempczinski said consumers, particularly lower-income households, are eating at home more often and are looking for deals. He noted those pressures “deepened and broadened” last quarter and have forced the company into a “comprehensive rethink” of pricing in the U.S.

“Consumers still recognize us as the value leader versus our key competitors, but it’s clear that our value leadership gap has recently shrunk,” Kempczinski said on Monday’s earnings call. “We are working to fix that with pace.”

In June, McDonald’s launched a $5 Meal Deal to win back customers. So far, those deals are selling “above expectations” and performing particularly well among lower-income consumers, McDonald’s U.S. President Joe Erlinger said on the call. He pointed out that 93% of McDonald’s franchisees have agreed to extend the offer further into the summer.

Kempczinski suggested the company needs to do even more to broaden its value appeal.

“Trying to move the consumer with narrow offerings that are one item or a few items is just not sufficient for the context that we’re in,” he said.

Chief Financial Officer Ian Borden said McDonald’s is taking a “forensic approach” to evaluating prices and “acting with urgency” to address diners’ price concerns.

McDonald’s underwhelming earnings report suggests consumers are still pushing back against rising fast food menu prices, which have outpaced inflation. Nearly 80% of respondents in a recent LendingTree survey said they now consider fast food a “luxury” because it’s become so expensive.

Last summer, a post on X went viral after showing an $18 Big Mac meal in Connecticut. The image drew outrage online and set off a wave of backlash, with some citing it as evidence of “greedflation.”

In May, McDonald’s disputed claims that it has raised prices “significantly beyond inflationary rates” and said the average price of a Big Mac in the U.S. has increased 21% from $4.39 in 2019 to $5.29 today. In a statement, Erlinger said franchisees set menu prices and that sky-high costs highlighted on social media posts were the “exception,” not the rule.

McDonald’s leaders did not provide specifics on Monday’s call about how the company will address price concerns in the months ahead but acknowledged consumer price sensitivity isn’t going away anytime soon.

“We expect customers will continue to feel the pinch of the economy and a higher cost of living for at least the next several quarters,” Erlinger said Monday.

Meanwhile, new menu items are in the works. The company is testing out a new burger called “The Big Arch,” which features two patties, cheese, “crispy toppings” and a “tangy McDonald’s sauce.” Kempczinski called it a “quintessential McDonald’s burger with a twist” and said it will be piloted across three international markets this year.

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