For the first time in over four years, McDonald's sales have dropped by double digits globally, according to surprising data. In the second quarter of this year, the company's net income dropped by 12% from June of the previous year to $2 billion, or $2.80 per share. The decline occurs as consumers are still being impacted by rising costs and inflation.
McDonald's is attempting to fix the situation and anticipates that this tendency will persist over the coming quarters. The worst problem facing McDonald's, according to Edward Jones analyst Brian Yarbrough, is that lower-class consumers are making fewer trips. This decline is having more of an effect than McDonald's typically experiences during difficult economic times, which is a shift in customer spending.
In the home market of the United States, McDonald's experienced a drop in guest counts, although results were bolstered somewhat by digital and delivery growth.
McDonald's shares, which are down 15% this year, rose nearly 4% after company executives said the $5 meal deal launched late in June sold above expectations. They said the company was working with franchisees in a bid to extend it beyond August.
The company, which stuck to its 2024 forecast for an operating margin in the mid-to-high 40% range, said it would be more selective with price increases to protect profitability.
"Even though things (traffic) are soft now, they should be getting better in the back half of the year, with better value on the menu," said Brian Mulberry, client portfolio manager at Zacks Investment Management.
Global comparable sales fell 1% in the second quarter, compared with expectations of a 0.5% increase. Overall revenue rose 1%.
CEO Chris Kempczinski said there is a lot more deal-thinking from consumers who have become "very discriminating." "Consumer sentiment in most of our major markets remains low," he said.
McDonald's results dovetail with comments last week from Coca-Cola CEO James Quincey, who said there had been "some softness in away-from-home channels" in North America, an indication of fewer people eating out.
