McDonald’s same-store sales declined 0.7% in the second quarter, the company said on Monday, as consumers frustrated by higher prices cut back on their visits to fast-food chains.
Global results weren’t much better, as economic and geopolitical issues contributed to sales declines in key markets around the world. Systemwide, same-store sales declined 1% in the quarter ended June 30.
It was the worst top-line performance for the Chicago-based fast-food giant since the second quarter of 2020, when a global pandemic shut down restaurants worldwide. In the U.S., it was the first time same-store sales declined in 16 quarters.
There was little solace in looking at two-year trends. Same-store sales at the chain in the U.S. decelerated by 510 basis points in the quarter on a two-year “stacked” basis.
Revenues were flat in the quarter, at $6.5 billion. Net income declined 12% to just over $2 billion, or $2.80 per share. Both figures fell short of Wall Street expectations for the quarter, according to the website Earnings Whispers.
McDonald’s CEO Chris Kempczinski said during the company’s earnings call on Monday that economic headwinds facing much of the fast-food sector have hurt the chain’s traffic. But they also said that “factors within our control, most notably our value execution,” contributed to the challenges.
“Our value leadership gap has recently shrunk,” he said. He noted that the system was hurt by “significant inflationary cost increases,” leading operators to raise prices, which “disrupted long-running value offers, leading consumers to reconsider” whether to dine out at one of the chain’s restaurants.
The results confirm warnings from the company that began in earnest in February, when Kempczinski noted that slower grocery price inflation was making those prices look cheaper compared with McDonald’s and other fast-food chains.
Executives intensified those warnings in May. “I think four months into the year, I think what we can say is clearly 2024 isn’t going to be a typical year for the broader industry,” CFO Ian Borden told analysts at the time. “The macro headwinds have been more significant than I think we even anticipated coming into the year and we continue to see those macro headwinds as we have started quarter two in, frankly, many of our large international markets and the U.S.”
McDonald’s did generate more sales through digital channels, notably its loyalty customers. Sales to loyalty members totaled $7 billion in the quarter across its 50 global markets where MyMcDonald’s Rewards is active. The chain has generated $26 billion through loyalty members over the previous 12 months.
Delivery also grew in the period.
McDonald’s sales weakness was evident elsewhere in the world, too. Same-store sales declined 1.1% in its International Operated Markets division, featuring some of its most mature international markets. The company said same-store sales were negative in “a number of markets,” notably France.
Same-store sales declined 1.3% in its International Developmental Licensed Markets, featuring some of the chain’s growth markets. The company blamed that weakness on the impact of the war in the Middle East, along with negative same-store sales in China.
McDonald’s U.S. same-store sales do not include much from the chain’s value offer, its $5 Meal Deal that started in late June. McDonald's U.S. market president Joe Erlinger on the call did say that the deal has performed better than expected, particularly with lower-income consumers.
The results will likely intensify the chain’s push into value later this year. More than 90% of the chain’s U.S. markets voted to approve an extension of that meal deal into next month. The company is also actively testing other value options.
UPDATE: This story has been updated to include more information from McDonald’s second-quarter earnings call.
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