McDonald’s Corp. experienced its first decline in sales since 2020 during the second quarter of this year, missing analysts’ expectations for modest growth. The fast-food giant reported a 1% drop in comparable sales, a key metric that tracks revenue from restaurants open for over a year. This decline was observed across all geographic segments, including the US, where reduced foot traffic contributed significantly to the downturn.
The company’s shares remained largely unchanged in early trading in New York. Year-to-date, McDonald’s stock has fallen by 15%, contrasting with a 14% gain for the S&P 500 index over the same period.
Earnings for the quarter, excluding certain items, were $2.97 per share, which fell short of the average analyst estimate. Despite this, McDonald’s maintained its forecasts for new store openings and operating margins.
Sales growth has been sluggish this year as consumers around the globe cut back on fast-food spending, influenced by a combination of rising prices and tighter household budgets. In response, McDonald’s introduced a $5 meal deal in the US at the end of the last quarter, aimed at offering more affordable options to diners. Early feedback suggests that the deal is attracting customers, but any noticeable sales boost may take time to materialize. Additionally, the chain has rolled out limited-edition menu items, such as the Bacon Cajun McCrispy and the “Grandma” McFlurry, in an attempt to drive traffic.
CEO Chris Kempczinski highlighted that the company will focus on “reliable, everyday value” to appeal to increasingly budget-conscious consumers. Other strategic priorities include enhancing the chain’s chicken offerings and expanding its loyalty program.
Internationally, McDonald’s has faced challenges due to ongoing boycotts related to the Israel-Hamas conflict, which have negatively impacted sales in the Middle East region. The company has previously indicated that this slump would persist until the conflict is resolved. Sales in China and France have also seen declines.
Moreover, system-wide sales, which encompass revenue from new restaurants, have also decreased, suggesting that new openings are not compensating for the weakening performance of existing units. McDonald’s is actively pursuing an ambitious expansion strategy, with plans to grow its global footprint to 50,000 locations by 2027, up from approximately 42,000 at the beginning of this year.
