We’re (not) lovin’ it: McDonald’s posts first sales drop since 2020
Consumers voted with their wallets in 2024 and began to shy away from McDonald’s price increases for their fast-food offerings, leading to the first drop in sales at the restaurant chain since 2020.
The fast-food giant posted a global sales drop of one per cent year on year in the three months to the end of June.
Consumers have been “more discriminating with their spending”, chief executive Chris Kempczinski said.
Net profit at the NYSE-listed company fell by 12 per cent to $2.02bn (£1.57bn). Diluted earnings per share fell by six per cent, to $2.97 (£2.31).
Kempczinski added that McDonald’s will focus on growth drivers “like chicken and loyalty”.
As inflation has eaten into earnings, many consumers have had to make tough choices about spending. Between May 2021 and May 2024, food prices rose by 30.6 per cent in the UK.
Despite McDonald’s historically affordable offering, the price of its burgers has risen in the last few years to get closer to other meal options.
The average price of a Big Mac meal in the UK rose from £4.49 in 2017 to £7.89 in 2024, a rise of around 75 per cent.
However, the company has also suffered under its attitude to the war in Gaza; consumers pulled back from the chain after it handed out thousands of free meals to soldiers in Israel.
It has begun to offer discounts to lure customers back to the store: in the US, for example, it has started a $5 (£3.9) deal for a sandwich, chicken nuggets, fries and a drink.
The company’s share price has fallen more than 15 per cent in the year to date.
Danni Hewson, AJ Bell head of financial analysis, said: “It’s been a tough tightrope for businesses to walk over the past couple of years as inflation nibbled at margins and increased borrowing costs further suppressed consumer spend.
“Value has become crucial and that’s meant fewer people are taking a bite out of those big money items that pad the margins.
“But whilst the golden arches are looking a little tarnished, the fact that its operating margin forecast has remained unchanged demonstrates the business is optimistic that falling inflation and the lure of the brand will bring customers back,”