MCDONALD’S REPORTS FIRST GLOBAL SALES DECLINE IN THREE YEARS

Tue 30 July 2024:

McDonald’s has experienced its first drop in global sales in over three years as consumers, hit by inflation, opt for cheaper alternatives and reduce dining out. The fast-food giant reported a 1 percent decline in worldwide sales for the April-June period, marking the first decrease since late 2020 during the height of the COVID-19 pandemic.

The decline was more pronounced in international developmental licensed markets, with a 1.3 percent fall in sales. Weak consumer sentiment in China and boycotts in the Middle East over perceived support for Israel contributed to the drop.

CEO Chris Kempczinski noted that consumers have become “very discriminating” with their spending. While McDonald’s had previously gained from customers trading down from more expensive restaurants, the current trend shows a greater loss of low-income consumers who are choosing to eat at home instead.

“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. “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 economise.”

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Efforts to Regain Market Share

Kempczinski acknowledged that while McDonald’s is still seen as the best-value fast-food chain, the “value leadership gap” with competitors has decreased. He emphasized that the company is working quickly to address this issue. A $5 meal deal launched in June exceeded expectations and 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.

Despite the sales decline, McDonald’s shares rose 4.5 percent on Monday morning as investors were optimistic about the company’s strategies to improve its performance.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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