McDonald's struggles with lower sales amid consumer spending cutbacks

McDonald's earnings: McDonald's faced a setback in the first quarter as it fell short of Wall Street estimates for sales, signalling a shift in consumer behaviour towards more budget-conscious spending. The burger chain's global comparable sales growth declined for the fourth consecutive quarter, reaching 1.9 per cent, as consumers became increasingly selective with their expenditures.

The company's shares dipped approximately 2 per cent in premarket trading, adding to a year-to-date decline of nearly 8 per cent. Analysts had anticipated a 2.35 per cent rise in global comparable sales, according to LSEG data.

In response to rising costs of ingredients like eggs, McDonald's implemented price hikes ranging from mid- to high-single-digit percentages over the past year. However, these adjustments were not sufficient to offset the impact of reduced consumer spending.

Comparable sales in McDonald's International Developmental Licensed Markets segment, constituting 10 per cent of its total revenue in 2023, experienced a 0.2 per cent decline, contrary to analysts' expectations of a 0.98 per cent rise. Factors such as the Middle East conflict and economic sluggishness in China, the company's second-largest market, contributed to this decline.

In the United States, heightened competition for breakfast hour spending prompted McDonald's to introduce low-priced menu options, including breakfast value bundles and items priced below $4. Despite these efforts, first-quarter same-store sales grew by only 2.5 per cent, significantly lower than the 12.6 per cent growth recorded the previous year.

McDonald's reported a quarterly adjusted per-share profit of $2.70, slightly below analysts' estimates of $2.72. Total operating costs and expenses increased by 2 per cent to $3.43 billion, reflecting the challenges faced by the company in managing costs amidst sluggish sales growth.

(With Reuters inputs)