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McDonald’s (MCD.N) reported a surprise drop in global sales on Monday, marking the first decline in 13 quarters as consumers turn away from higher-priced menu items like Big Macs. According to Reuters, Q2 global comparable sales fell by 1%, missing expectations of a 0.5% increase. Adjusted earnings per share (EPS) also missed the mark, coming in at $2.97 compared to the anticipated $3.07.
Persistent inflation has driven lower-income consumers to seek more affordable food options at home, impacting not only McDonald’s but also other fast food giants like Burger King (QSR.TO), Wendy’s (WEN.O), and Taco Bell. These companies are now focusing on value meals to boost customer traffic.
Despite the sales decline, McDonald’s shares rose nearly 4% after executives highlighted the success of the $5 meal deal launched in late June. This promotion exceeded expectations, leading the company to consider extending it beyond August. CEO Chris Kempczinski noted the significant shift in consumer behavior, stating, “Consumer sentiment in most of our major markets remains low.”
The company reaffirmed its 2024 forecast for operating margins in the mid-to-high 40% range and emphasized a more selective approach to price increases to maintain profitability. Brian Mulberry, a client portfolio manager at Zacks Investment Management, expressed optimism, saying, “Even though things are soft now, they should be getting better in the back half of the year with better value on the menu.”
McDonald’s overall revenue rose by 1% despite the dip in comparable sales. The company’s strategy moving forward will likely focus on balancing value offerings with profitability, aiming to attract deal-seeking consumers while maintaining its financial health.