McDonald’s global sales drop for the first time in four years as cost of living impacts consumer choices

McDonald’s global sales fell for the first time in nearly four years, falling 1% in the second quarter as consumers tired of inflation opted to eat at home or opt for cheaper menu options.

The company expects same-store sales to continue to decline over the next few quarters, and is introducing new meal offerings and menu items in response.

“Consumers still see us as the value leader compared to our key competitors, but it’s clear that our value gap has narrowed recently,” McDonald’s chairman and CEO Chris Kempczinski said during a conference call with investors. “We’re working to fix that at a rapid pace.”

Sales at locations open at least a year fell 1% from April to June, marking the first decline since the fourth quarter of 2020 when the pandemic led to widespread store closures and stay-at-home orders.

In the United States, sales fell about 1%. Although McDonald’s saw fewer customers, those who did visit spent more because of higher prices. Kempczinski defended the menu price hikes, pointing to paper, food and labor costs that have risen by 40% in some markets over the past few years.

The company’s net income fell 12% to $2 billion, or $2.80 per share. Excluding one-time items such as restructuring costs, McDonald’s earned $2.97 per share, below the $3.07 per share expected by industry analysts.

In May, McDonald’s CEO Joe Erlinger noted in an open letter that the price of the Big Mac had increased 21% since 2019.

The sales decline extends beyond McDonald’s. Customer traffic at U.S. fast-food restaurants fell 2% in the first half of the year compared with the same period last year, according to market research firm Circana. David Portalatin, a food industry consultant at Circana, expects rising inflation and consumer debt to continue to weigh on traffic in the second half of 2024.

McDonald’s also reported lower footfall in stores in France and the Middle East, where a boycott linked to alleged support for Israel in the Gaza conflict has hit sales. In China, weak consumer sentiment has prompted customers to look to lower-priced rivals.

In April, McDonald’s warned that more customers were looking for better value at affordable prices. On June 25, the company introduced a $5 meal promotion at U.S. restaurants, which came late in the reporting period. According to Joe Erlinger, president of McDonald’s U.S., sales of the $5 meal promotion are exceeding expectations and are drawing lower-income consumers back to McDonald’s stores. The promotion will run through August, with 93% of McDonald’s franchisees participating.

Other countries, such as Germany and the UK, have also seen success with meal deals. However, Kempczinski stressed the need for broader value propositions and improved marketing.

He added, “Trying to move the consumer with one or a few goods is not enough under the circumstances we are living in.”

New menu items, including the value-priced Big Arch Double Burger, are also being tested in three international markets through the end of this year.

For the second quarter, McDonald’s revenue was flat at $6.5 billion, slightly below the $6.6 billion Wall Street had expected, according to analysts surveyed by FactSet.

Despite the sales decline, investors seemed pleased with McDonald’s plans to reverse the trend. McDonald’s shares rose 4% in early trading Monday.