McDonald’s store traffic falls unexpectedly as diners grow uneasy about economy

McDonald's restaurant signs are shown in in East Palestine, Ohio, Feb. 9, 2023. McDonald's reports earning on Monday, July 29, 2024. (AP Photo/Gene J. Puskar, File)

McDonald’s store traffic fell further than expected in the first quarter as economic uncertainty weighed on diners.

The trouble was particularly acute in the U.S., where same-store sales — or sales at locations open at least a year — slumped 3.6 per cent. That was the biggest U.S. decline McDonald’s has seen since 2020, when a pandemic shuttered stores and restaurants and other public spaces nationwide.

McDonald’s Chairman and CEO Chris Kempczinski said lower- and middle-income consumers, worried about inflation and the economic outlook, cut back on fast food during the January-March period.

Industrywide traffic from consumers making US$45,000 per year or less was down by double-digit percentages, he said, and traffic from middle-income consumers was down nearly as much. Only traffic from those making US$100,000 or more remained solid, he said.

“We believe McDonald’s can weather these difficult conditions better than most,” Kempczinski said Thursday in a conference call with investors. “However, we’re not immune to the volatility in the industry or the pressures that our consumers are facing.”

McDonald’s rivals have reported similar downturns. Yum Brands, which owns the Taco Bell, KFC, Habit Burger & Grill and Pizza Hut brands, said Wednesday that its U.S. same-store sales fell two per cent in the first quarter. Chipotle also reported weaker-than-expected same-store sales in the first quarter.

McDonald’s same-store sales fell one per cent globally in the first quarter, as growing traffic in Japan, China and the Middle East failed to overcome weakness in markets like the U.K. Without the impact of the extra leap year day in 2024, same-store sales were flat, the company said. Wall Street had been expecting an increase of nearly two per cent, according to analysts polled by FactSet.

The Chicago-based chain has responded by introducing a U.S. McValue menu, which lets customers buy one item for US$1 when they buy a full-priced item. It also announced Thursday that its $5 Meal Deal will run through the rest of this year. That deal was introduced last June and extended several times.

Kempczinski said the $5 Meal Deal is resonating well with consumers but the McValue menu is not driving the additional sales the company expected, so McDonald’s may make changes to it.

Kempczinski said McDonald’s had expected the first quarter to be its weakest this year. Already, things are looking up.

In April, a McDonald’s meal tied to “A Minecraft Movie,” which was offered in 100 countries, sold out of its collectible figures in less than two weeks. New chicken strips and the U.S. return of the snack wrap — exected later this year — are also expected to drive traffic, Kempczinski said.

McDonald’s reaffirmed its financial targets for the full year despite the impact of tariffs. And Kempczinski said McDonald’s internal surveys show that anti-American sentiment, particularly in Canada and Northern Europe, doesn’t seem to be impacting how consumers feel about the McDonald’s brand.

McDonald’s shares were down 1% in morning trading Thursday.

McDonald’s first quarter revenue fell three per cent to $5.95 billion, short of analysts’ forecast of US$6.09 billion, according to FactSet.

Net income fell three per cent to $$1.86 billion. Adjusted for restructuring charges and other one-time items, the company earned $2.67 per share, beating Wall Street projections by a penny.

Dee-ann Durbin, The Associated Press