McDonald’s has reported its first global sales decline in more than three years as consumers, squeezed by inflation, seek cheaper alternatives and cut back on dining out.
In the April-June period, McDonald’s worldwide sales fell by 1 percent, marking the first drop since the last quarter of 2020, when the COVID-19 pandemic and government restrictions forced businesses to close and kept millions at home.
Sales in the “international developmental licensed markets,” which are operated by licensees, saw a sharper decline. Sales in these markets fell by 1.3 percent due to weak consumer sentiment in China and boycotts in the Middle East over the fast-food chain’s perceived support for Israel.
CEO Chris Kempczinski noted that consumers are becoming more selective with their spending. Previously, McDonald’s benefitted from consumers “trading down” from more expensive restaurants to the fast-food chain. However, the loss of low-income consumers has outweighed this benefit.
“We are seeing trade down, but what we’re seeing is that the loss of the low-income consumers is greater than the trade-down benefit,” Kempczinski said during a conference call with investors. “You’re seeing with that low-income consumer, in many cases, they’re dropping out of the market, eating at home, and finding other ways to economize.”
Kempczinski acknowledged that while customers still view McDonald’s as the best-value fast-food option, the “value leadership gap” with its rivals has narrowed. “We are working to fix that with pace,” he said.
Executives mentioned that a $5 meal deal launched in June had exceeded expectations. The promotion will be extended at most US outlets beyond August.
“We are resolved to reignite share growth in all our major markets regardless of the prevailing market conditions. This won’t happen overnight, but it will happen,” Kempczinski stated.