McDonald’s Earnings:
On Monday, McDonald’s announced quarterly earnings and revenue that fell short of analysts’ predictions, with same-store sales experiencing a decline in all divisions.
McDonald’s CEO Chris Kempczinski noted during the company’s earnings call that traffic in key markets such as the U.S., Australia, Canada, and Germany has decreased. He also highlighted that the ongoing conflict in the Middle East has further impacted several regions.
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Company Leaders
“These external challenges undoubtedly affected our quarterly performance, leading to declines in comparable sales worldwide and across all segments. However, we also faced internal issues, particularly with our value execution, which contributed to our weaker performance,” Kempczinski said.
Company leaders admitted customers felt their prices were too steep and announced they were adopting a “forensic approach” to assess their value offerings. They are collaborating with franchisees to implement the required changes.
According to a survey of analysts by LSEG, the company’s reported figures were:
- Earnings per share: $2.97 (adjusted) compared to the expected $3.07
- Revenue: $6.49 billion versus the anticipated $6.61 billion
The fast-food leader reported a net income of $2.02 billion, or $2.80 per share, for the second quarter, a decrease from $2.31 billion, or $3.15 per share, from the previous year. When excluding expenses related to the planned sale of its South Korean operations and other factors, McDonald’s earnings were $2.97 per share.
The company’s quarterly revenue was $6.49 billion, showing little change compared to the same period last year.
McDonald’s experienced a 1% decline in same-store sales, falling short of Street account’s forecasted growth of 0.4%. This marks the first decline in companywide same-store sales since the fourth quarter of 2020.
In the U.S., same-store sales decreased by 0.7% for the quarter. In contrast, the previous year saw a 10.3% increase in U.S. same-store sales, driven by the popularity of the Grimace Birthday Meal.
Over the past year, many consumers have reduced their dining-out habits, especially at fast-food establishments, which are no longer perceived as offering good value. McDonald’s reported a decrease in foot traffic to its U.S. locations during the quarter.
McDonald’s U.S. President Joe Erlinger
McDonald’s U.S. President Joe Erlinger remarked, “Ultimately, we expect customers will continue to feel the impact of the economy and increased living costs for the foreseeable future in this highly competitive environment.
Executives had earlier cautioned that the battle for customers had intensified amid a weakening consumer climate. In response, McDonald’s is focusing on discounts to attract more diners. The company introduced a $5 meal deal in late June, just five days before the quarter ended.
Promotion
A week ago, the company informed its U.S. system of its decision to extend the value of meal promotion beyond its initial four-week period, noting that it has successfully attracted customers.
During the earnings call, executives reported the deal performed better than expected, with the strongest uptake among lower-income diners. Erlingen mentioned that the promotion has enhanced the brand’s reputation for affordability and boosted guest counts, although it has not yet led to increased sales.
McDonald’s is also focusing on attracting customers outside the U.S. Its international markets division, which encompasses major regions like France and Germany, experienced a 1.1% decline in same-store sales during the quarter.
Executives noted France has been facing challenges due to pricing competition and consumer boycotts related to the conflict in Gaza.
The international developmental licensed markets division, which covers regions such as China and Japan, saw a 1.3% drop in same-store sales. McDonald’s is still experiencing repercussions from the brand boycotts related to the Gaza conflict, and sales in China remain challenging.