USA – Fast food giant McDonald’s has recorded a 12% decline in profits for Q2 2024 to US$2 billion, partly attributed to inflation-induced demand decline.
The company’s revenues remained flat at US$6.5 billion for the reported quarter while consolidated operating income declined by 6% in the reported quarter.
McDonald’s recorded a 1% comparable sales decline in all its operating regions compared to the 0.5% predicted growth, a significant shift from Q2 2023 when global comparable sales increased by 9%.
Consolidated sales in the US declined by 1%. Comparable sales in the company’s international operated market segment declined by 1.1% while its international developmental licensed markets segment decreased by 1.3%.
The decline in consolidated US sales was mostly attributed to a significant decline in guest counts. However, they were subtly bolstered by digital sales and delivery growth.
According to McDonald’s, sales in the Middle East and surrounding regions have been significantly affected by the ongoing War in Gaza, as some customers have opted to boycott the fast food chain in support of Palestine.
The fast food giant garnered strong sales from outlets that offered lower-priced meals compared to more expensive players in the food service industry. However, this strong showing has shifted in the reported quarter.
Christopher Kempczinski, McDonald’s CEO, said, “We are seeing trade down, but what we’re seeing is that the loss of the low-income consumers is greater than the trade-down benefit. You’re seeing with that low-income consumer, in many cases, they’re dropping out of the market, eating at home and finding other ways to economize.”
The CEO admitted he does not expect the current international environment to change in the near future, which is why McDonald’s is opting to focus on value deals and similar strategies that result in competitive pricing.
According to Kempczinski, the company’s plan to woo low-income customers in the short and medium term involves a doubling down of special meal promotions, marketing campaigns and menu changes.
Although the company recorded earnings below expectations, share prices increased by 4.5% when the report was released, indicating a subtle confidence in the market that the retail giant will bounce back from its current challenges.
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