McDonald’s global sales are falling for the first time in four years as the cost of living affects consumer choices

McDonald’s global sales fell for the first time in almost four years, with a 1% decline in the second quarter, as consumers hurt by inflation opt to eat at home or opt for cheaper menu options.

The company expects same-store sales to continue to decline in coming quarters and is introducing meal deals and new menu items in response.

“Consumers continue to recognize us as the value leader relative to our top competitors, but it is clear that our value leadership gap has recently narrowed,” said Chris Kempczinski, chairman, president and CEO of McDonald’s, during a conference call with investors. “We are working to resolve that quickly.”

Sales at locations open at least a year fell 1% in the April-June period, marking the first decline since the final quarter of 2020, when the pandemic led to store closures and widespread housing lockdowns.

In the US, sales fell by almost 1%. Although McDonald’s saw fewer customers, those who did visit spent more due to price increases. Kempczinski defended the higher menu prices, citing a 40% increase in paper, food and labor costs in some markets in recent years.

The company’s net profit fell 12% to $2 billion, or $2.80 per share. Excluding one-time items such as restructuring costs, McDonald’s earned $2.97 per share, lower than the $3.07 per share profit forecast by industry analysts.

In May, McDonald’s CEO Joe Erlinger noted in an open letter that the price of Big Macs had risen 21% since 2019.

The decline in sales extends beyond McDonald’s. According to market research firm Circana, customer traffic at U.S. fast-food restaurants fell 2% in the first half of the year compared to the same period last year. David Portalatin, food industry advisor for Circana, expects high inflation and rising consumer debt to continue to impact traffic in the second half of 2024.

McDonald’s also reported lower store traffic in France and the Middle East, where boycotts over perceived support for Israel in the Gaza conflict have affected sales. In China, weak consumer confidence has driven customers to cheaper rivals.

In April, McDonald’s warned that more customers were looking for better value and affordability. On June 25, the company introduced a $5 meal deal at U.S. restaurants, which was late in this financial reporting period. Sales of the $5 meal deal are exceeding expectations and drawing lower-income consumers back to McDonald’s stores, according to Joe Erlinger, McDonald’s U.S. president. The promotion runs until August, with 93% of McDonald’s franchisees participating.

Other countries, such as Germany and the United Kingdom, have also had success with meal deals. However, Kempczinski emphasized the need for a broader offering and improved marketing.

“Trying to move the consumer with one or a few items is not enough for the context we are in,” he said.

New menu items including the value-oriented double Big Arch burger are also being tested in three international markets through the end of this year.

For the second quarter, McDonald’s revenue was flat at $6.5 billion, just below the $6.6 billion Wall Street expected, according to analysts polled by FactSet.

Despite the sales decline, investors seemed pleased with McDonald’s plans to reverse the trend. Shares of McDonald’s rose 4% in Monday morning trading.