McDonald’s counts the cost of budget-conscious consumers

Consumers had been “more discriminating with every dollar they spend”, the boss of McDonald’s said as the American fast-food chain missed Wall Street’s profit expectations in the last quarter.

The Chicago-based business, which also revealed the pressures on its global business from conflict in the Middle East, said growth in its comparable sales in its first quarter had edged up by only 1.9 per cent, slower than analysts had forecast.

All the group’s geographic markets fell short of market predictions. Sales in the United States, buoyed by higher prices, increased by 2.5 per cent, but that was sharply lower than a 12.6 per cent rise recorded last year and was slightly below Wall Street’s estimates.

McDonald’s has raised the prices on its menu over the past year in response to higher costs of eggs and other ingredients, despite the budgets of its lower-income customers remaining stretched.

The burger group said sales from its international licensees, which made up about 10 per cent of the group’s overall revenue last year, had slipped by 0.2 per cent as war in the Middle East continued to affect sales and had “more than offset” positive trends in Japan, Latin America and Europe.

Total revenue in the first three months of 2024 rose by 5 per cent to $6.2 billion, helping to lift quarterly net income to $1.93 billion.

Chris Kempczinski, 55, its chief executive, said: “Consumers continue to be even more discriminating with every dollar that they spend as they faced elevated prices in their day-to-day spending, which is putting pressure on the quick service restaurant industry.”

In March Ian Borden, the group’s finance boss, warned that its international sales would fall steadily in the quarter, pressured by the Middle East conflict and a sluggish economy in China, its second largest market. This year Kempczinski noted the “meaningful business impact” of the conflict, as well as “associated misinformation” about the brand.

McDonald’s is one of several western brands to have faced boycotts over a perceived pro-Israeli stance after announcing on Instagram that it was providing free food to Israeli soldiers and hospitals. In January, Starbucks was forced to cut its annual sales forecasts because of lower sales and traffic at stores in the Middle East.

The company’s first-quarter results contrasted with those from other fast-food chains. Restaurant Brands International, the Burger King owner, beat expectations this week, driven by a revival in demand at its outlets, while Domino’s Pizza benefited from offers on its pizzas.

Founded by Dick and Mac McDonald in 1940 in San Bernardino, California, McDonald’s is now one of the most recognisable brands in the world, with more than 40,000 outlets in more than 100 countries. McDonald’s Corporation has a market value of $197 billion. Its shares closed down 49 cents, or 0.2 per cent, at $273.06 in ­New York last night.