McDonald’s posts first sales decline in 13 quarters

McDonald’s reported a surprising one per cent decline in global sales for the second quarter, marking its first such drop in 13 quarters.

Analysts’ expectations, according to LSEG data, had predicted a modest increase of 0.53 per cent.

The fast-food giant attributed the decline to persistent inflation, which has forced budget-conscious consumers to prioritise cheaper meals at home.

McDonald’s and Starbucks faced sales declines in the Middle East due to consumer boycotts related to the Gaza war. This trend has impacted the entire industry, with Domino’s Pizza also experiencing muted demand.

In response, restaurants like McDonald’s have launched value-focused initiatives like $3-$5 meal bundles and limited-time offers, aiming to lure back cost-conscious customers.

The company plans to extend its popular $5 meal offer into August at most US locations after a successful launch in June.

Consumers are being more selective with their spending, said McDonald’s CEO Chris Kempczinski. Despite the sales decline, the company maintained its 2024 operating margin forecast in the mid-to-high 40 per cent range and its capital expenditure budget of up to $2.7 billion.

More than half of this budget will be allocated to opening new restaurants in the US and international markets.

US comparable sales fell 0.7 per cent compared to a robust 10.3 per cent jump a year ago. International markets fared worse, with sales dropping 1.1 per cent driven by weakness in France.

This stands in stark contrast to the 1.69 per cent growth predicted by analysts and a significant downturn from the 11.9 per cent growth seen just a year prior.

The slow recovery in China and the ongoing conflict in the Middle East further hampered performance.

McDonald’s business segment with local partners in these regions saw sales decline 1.3 per cent compared to a 14 per cent increase the previous year.

Attribution Reuters