McDonald’s is facing a sales decline as customers cut back on spending, leading to a 1% drop in sales at outlets open for at least a year in the April-June period compared to the previous year. The fast-food chain has responded by offering money-off deals and discounts to attract cost-conscious customers and those who have boycotted the chain due to the Israel-Gaza war. This poor performance has prompted McDonald’s to rethink its pricing strategy and focus on value efforts to stop the sales decline.
McDonald’s CEO, Chris Kempczinski, emphasized the need for a “comprehensive rethink” of pricing and highlighted recent promotions like the $5 happy meal in the US and the UK campaign offering three items for £3. Despite the sales decline, shares in the company rose over 3% after the update, with Mr. Kempczinski expressing confidence in the company’s ability to make the new strategy work. However, McDonald’s still faces challenges in reclaiming its reputation for value, as price increases in response to inflation have led consumers to reconsider their buying habits.
Bank of America analyst Sara Senatore noted that McDonald’s has raised prices on key items faster than its competitors, impacting consumer perceptions. The company is also contending with slower consumer spending globally, including in major economies like China. In addition, lower-income customers are particularly affected by the sales decline, with weakness in France and price wars in China also contributing to McDonald’s struggles. Despite the challenges, McDonald’s executives are working on strategies to adapt to changing consumer behaviors and preferences in the coming months.
