Higher prices have really affected the way consumers are spending money
Despite offering $5 value meals in an effort to retain consumers, McDonalds is struggling.
The fast food giant released its second quarter earnings report, and for the first time since 2020, it reported a drop in sales. While the company was estimated to see a 0.53% sales increase this quarter, global sales actually fell 1%.
According to McDonalds President and CEO Chris Kempczinski, the company was no stranger to the effects of inflation. He explained that expenses for things like paper goods, labor, and food itself have increased as much as 40% in some cities.
As we absorb these cost increases in partnership with our franchisees, we look for ways to protect restaurant profitability via productivity efforts and selective price increases, Kempczinski said during the earnings call. These price increases disrupted long-running value programs and led consumers to reconsider their buying habits.
What went wrong?
The overall decline in sales is most likely due to higher prices at McDonalds locations around the world, leaving inflation-weary consumers opting for other meal options.
Heres a closer look at McDonalds numbers from the second quarter of 2024:
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Global sales fell 1%
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U.S. sales fell 0.7%
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International sales dropped 1.1%
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Sales dropped 1.3% in China and the Middle East
Last year, U.S. sales were up 10.3% in the second quarter, while global sales were up 14%.
Where does McDonalds go from here?
Kempczinski explained that the $5 value meal was incredibly popular for the company. However, it didnt debut until late into the second quarter, so there hasnt been enough time to see how the deal will benefit the companys bottom line. The majority of McDonalds locations will continue offering the $5 value meal through August.
Moving forward, McDonalds plans to place a stronger emphasis on chicken, which has become more popular recently, and roll out new items. One such item is the Big Arch burger two burger patties, cheese, crispy topping, and tangy sauce.
We are confident that Accelerating the Arches is the right playbook for our business and as consumers are more discriminating with their spend, we are focused on the outstanding execution of delivering reliable, everyday value and accelerating strategic growth drivers like chicken and loyalty, Kempczinski said.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-07-30 11:15:45
