In a challenging third quarter, McDonald's reported a second consecutive drop in sales, grappling with reduced consumer demand across key international markets including France, the UK, the Middle East, and China. On Tuesday, the fast-food giant disclosed a 1.5% decline in global comparable sales year-on-year, exceeding analysts' predictions of a 0.6% decrease, according to a Visible Alpha survey.
This marks the first time McDonald’s has experienced back-to-back sales declines since the pandemic's onset in 2020, following a 1% drop in the previous quarter. The company is facing the dual challenge of re-engaging customers who are tightening their budgets due to ongoing food inflation, particularly among lower-income demographics.
Despite the sales decline, McDonald’s reported a 3% increase in revenue, reaching $6.9 billion, which surpassed the expected $6.8 billion. However, net profit decreased by 3% to $2.26 billion, falling short of the anticipated $2.3 billion.
CEO Chris Kempczinski emphasized the company’s commitment to delivering value and affordability amid shifting consumer spending habits. “We will stay laser-focused on providing an unparalleled experience with simple, everyday value that our consumers can count on,” he stated.
To attract U.S. customers deterred by rising menu prices, McDonald’s has extended a $5 meal deal that was introduced earlier in the summer. This promotional strategy appears to have yielded positive results, as comparable sales at approximately 13,500 U.S. locations saw a slight rebound, increasing by 0.3% after a dip in the previous quarter.
However, the recovery hopes were dampened by a recent E. coli outbreak linked to onions used in Quarter Pounder hamburgers in parts of central U.S. This incident, which was identified this month, negatively impacted the company’s stock but occurred after the close of the third quarter. The chain plans to resume Quarter Pounder sales in the affected areas after health officials traced the contamination back to a single supplier in Colorado, prompting McDonald's to cease onion purchases from that source.
Global comparable sales reflect performance from restaurants open for at least 13 months in both the U.S. and international markets. In its overseas operations, McDonald's reported a 2.1% decline in comparable sales, primarily driven by poor performance in France and the UK. The company's international licensed markets saw an even steeper drop of 3.5%, impacted by the ongoing conflict in the Middle East and weaker sales in China, although its Latin American business did see growth.
In an effort to boost sales, McDonald's initiated a promotional campaign in August offering collectible cups in over 30 countries, which Bernstein Research suggested could positively influence comparable sales figures. With a global footprint of 42,406 restaurants, McDonald's continues to adapt its strategies to navigate the evolving market landscape.
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