-
McDonald’s global comparable sales fell 1% year over year last quarter, missing analyst estimates.
-
But the fast-food giant’s shares are up more than 4% as its CEO says his $5 meal is paying off.
-
The company plans to focus on value going forward as low-income customers grow weary of inflation.
McDonald’s missed analyst estimates in its most recent earnings report, but the fast-food giant’s plan to bring back value to its customers is striking a chord with investors.
The stock rose 4.5% to $263.22 at 1:45 p.m. in New York on Monday after the earnings call. It climbed as much as 4.7% at intraday highs.
McDonald’s same-store sales fell 1% in the most recent quarter, marking the first decline in same-store sales since 2020. Net income for the quarter fell to $2.02 billion from $2.31 billion the year before.
CEO Chris Kempczinski said there was a profit miss fueled by high prices and an increasingly tired consumer. This is especially true for low-income customers avoid fast food while inflation increases.
Company executives say these customers won’t leave McDonald’s to the competition, but would rather eat out altogether.
“In this highly competitive landscape, we expect customers will continue to feel the pressure of the economy and higher costs of living in the coming quarters,” said McDonald’s U.S. President Joe Erlinger.
Kempczinski told investors that the brand plans to focus on value going forward as it looks to win back these customers.
Part of that plan lies in McDonald’s $5 meal strategy, which Kempczinski said is already working after its launch in late June. The program is most popular among lower-income consumers and improves brand sentiment around value and affordability.
The program was originally scheduled to last four weeks, but will continue after better-than-expected sales in most locations.
“We recognize that in several major markets, including the U.S., we have an opportunity to improve our value execution,” Kempczinski said on Monday’s call. “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. We are working to resolve this quickly.”
Kempczinski added that McDonald’s has an advantage because it can buy at a lower price than its competitors.
“We know how to do this. We have written the value playbook and we are working with our franchisees to make the necessary adjustments,” Kempczinski said.
Read the original article Business insider