McDonald’s CEO admitted the burger giant’s sales have taken a hit as jacked-up menu prices have turned off core customers — and signaled the chain plans to focus on “affordability” this year.
The Chicago-based fast-food behemoth — which has lately taken heat over a Big Mac combo meal priced at $18 — said its global same-store sales in the latest quarter had grown just 3.4%, falling short of the 4.7% growth Wall Street had expected.
The lackluster quarter — which the company also blamed on conflict in the Middle East that has slammed franchisees overseas — recently sent McDonald’s shares on the New York Stock Exchange tumbling more than 4% to $284.91.
“I think what you’re going to see as you head into 2024 is probably more attention to what I would describe as affordability,” McDonald’s chief executive Chris Kempczinski said on a Monday earnings call with analysts.
In particular, low income customers making less than $45,000 per year have largely stopped ordering from McDonald’s. Pummeled by inflation, they’re eating at home more frequently as grocery prices come down, Kempczinski admitted.
“Eating at home has become more affordable,” Kempczinski said. “The battleground is certainly with that low-income consumer.”
Last week, a McDonald’s outpost in Connecticut got slammed over its “outrageous pricing” after a customer was charged more than $7 for an Egg McMuffin — and nearly $6 for a side of hash browns.
Over the summer, a franchisee in nearby Darien, Conn., was called out for charging $18 for Big Mac combo meal. That location also sold a Quarter Pounder with Cheese and Bacon meal that came with fries and a soda for $19, according to viral posts.
McDonald’s said it expects US growth to moderate to between 3% and 4% compared to its 4.3% US growth in the most recent quarter. Most of that growth came from “increased menu prices,” the company said.
Meanwhile, all the company’s business regions worldwide registered positive growth with the exception of the Middle-East, where McDonald’s franchisees have seen a “meaningful business impact,” chief executive Chris Kempczinski said in January via a LinkedIn post.
The burger boss also has blamed “misinformation” about McDonald’s position on the Israel-Hamas war, echoing other companies including Starbucks who have said that boycotts of their stores were due to a false narrative that they had taken a position on the war.
In the days following the Oct. 7 Hamas attack, the “local owner operator” distinction was lost on a mob of protesters in Lebanon who ransacked a local McDonald’s restaurant after McDonald’s Israel franchises said they would offer free meals to Israeli soldiers taking part in military operations in Gaza.
About 10% of McDonald’s 18,000 restaurants overseas are located in the Middle East, accounting for 12% of international sales, according to a Wall Street Journal report.
“We do not expect to see meaningful improvement until there is a resolution in the Middle East,” the company’s chief financial officer, Ian Borden, said on the analyst call.
Experts have also warned that fast food prices could climb even higher as minimum wage hikes are implemented across the country. California’s $20-an-hour minimum wage for fast food workers goes into effect in April.
McDonald’s and Chipotle both announced that they would be hiking the prices of menu items at Golden State locations beginning this year.