By Savyata Mishra
Aug 4 (Reuters) – McDonald’s on Tuesday missed U.S. sales growth expectations for the second quarter as its value deals failed to sufficiently draw lower-income diners who have been cutting back restaurant spending due to growing economic worries.
Comparable sales in the largest market for McDonald’s grew 0.8%, below analysts’ estimates of a 1.06% rise, according to data compiled by LSEG. The pace of growth in the U.S. was 2.5% a year ago.
Higher prices for basic goods and fuel have left lower-income consumers, a key customer base for McDonald’s, with less money to spend on eating out.
“While our playbook is working around the world, we see an opportunity to raise the bar in the U.S. and accelerate performance in our largest market,” CEO Chris Kempczinski said.
The softer demand also comes as a multistate cyclosporiasis outbreak tied to contaminated produce impact store visits to Taco Bell amid uncertainty about food safety.
McDonald’s shares, which have fallen nearly 13% this year, rose about 1.4% in premarket trading after the burger chain reported better-than-expected quarterly profit.
NEW U.S. LEADER
The company named insider Skye Anderson to lead the “acceleration” at its U.S. business, betting on an executive with extensive experience across operations and international markets.
Kempczinski had warned in May that rising macroeconomic uncertainty, including concerns linked to the Iran conflict, was hurting consumer spending.
McDonald’s has spent the past year leaning on affordability and promotions to defend market share in a tough race with fast-food rivals, convenience stores and at-home meal consumption.
Its efforts included a revamped McValue platform, an under-$3 menu, discounted breakfast offers and a broader push into specialty beverages such as refreshers and crafted sodas.
Those initiatives, however, were offset by muted demand and difficult year-ago comparisons, as McDonald’s lapped the successful Minecraft-themed meal and Snack Wrap promotions that boosted customer visits.
Globally, comparable sales rose 1.3%, slowing from a 3.8% jump a year ago. Sales in McDonald’s international operated markets segment, which includes major European nations, rose 1.5%, down from 4% a year ago.
Analysts had expected softer demand in the region as higher energy costs and heatwave conditions curbed spending on dining out.
Adjusted earnings per share increased to $3.38 from $3.19 a year earlier, topping analysts’ average estimate of $3.32.
(Reporting by Savyata Mishra in Bengaluru; Editing by Arun Koyyur)
Comments