Life under the Golden Arches hasn’t been easy this year.
Just as McDonald’s was luring customers back with more affordable burgers, it’s faced a customer revolt over pricey Big Macs, an unsolicited cameo in an election-season shootout, and now an E. coli outbreak.
Yet, like U.S. consumers themselves, Mickey Dee’s remains in a strong position heading into 2025 despite ongoing challenges.
The fast food giant on Tuesday reported a 0.3% increase in the third quarter, reversing recent U.S. sales declines. Although foot traffic was still slightly down, the company said summer discounts were paying off.
“We are creating an unparalleled experience with simple, everyday value and affordability that consumers can trust as they continue to be conscious about their spending,” CEO Chris Kempczinski said in a statement accompanying the earnings call. We will continue to focus on providing this.”
The results come at the end of a difficult year for the nearly $213 billion restaurant chain, whose stock price has stabilized following its most recent results. Kempczinski said the outbreak of E. coli linked to the Quarter Pounder burger came after the health crisis caused the company’s stock price to briefly decline and U.S. customer traffic to drop by nearly 10% in the days that followed, according to Gordon’s estimates. sought to reassure investors that the market is under control. Haskett Financial Researcher.
“I think we’re catching up,” Kempczinski said on Tuesday’s earnings call.
Analysts say that despite the difficult quarter, McDonald’s appears resilient in the face of various pressures, something the company shares with U.S. consumers overall. It is said that
While other big brands like Starbucks have struggled to reconnect with wallet-conscious customers, McDonald’s has done a “great job” of bringing back customers, says Yale Customer Insights. said Ravi Dahl, director of the center.
“McDonald’s has also done a good job of embedding the brand into popular culture, increasing the brand’s relevance and meaning when it comes to entertainment and family. However, McDonald’s has done a good job of embedding the brand in popular culture, increasing the brand’s relevance and meaning when it comes to entertainment and family. However, the expectations of consumers on a budget We also had to change our product line to respond,” he said.
McDonald’s did not respond to a request for comment.
For many consumers, fast-food giants’ menus serve as an unofficial measure of the economy as a whole, said Sara Senatore, a Bank of America analyst who covers restaurants. “McDonald’s is so big that it’s always in the spotlight,” she said, describing it as something of a “bellwether.”
That may be one of the reasons why it became a hot topic during the presidential election. Vice President Kamala Harris has touted her former summer job at a burger chain in an effort to shore up her middle-class credentials. In response, former President Donald Trump threw fries at a Philadelphia-area McDonald’s earlier this month for a photo shoot.
The $5 meal deal that Mickey D’s launched in late June to reverse declining sales gave the company an attractive price point to advertise across the United States, Senatore said, adding that a new permanent We speculated that this could open the door to providing value. But before that promotion even rolled out, the company’s reputation as a low-cost option was tarnished.
Like many big brands, McDonald’s made huge profits as the economy reopened from the pandemic. In October 2022, executives said they were slowing traffic even as competitors began warning that some customers were closing their wallets after inflation peaked above 9% that summer. He boasted that he was raising prices without putting pressure on people. Still, the U.S. has repeatedly avoided much-anticipated recessions, and despite regularly giving pollsters a pessimistic view of a robust economy, Americans are reluctant to travel or eat out. continued to spend on non-essential items.
But by early this year, photos of eye-popping menu prices at some McDonald’s locations (including an $18 Big Mac combo served at a Connecticut rest stop starting in July 2023) had surfaced online. The company brought dissatisfaction among diners, which had been smoldering for years, to a boiling point. I couldn’t ignore it. Kempczinski acknowledged in an April earnings call that customer traffic had declined.
“Consumers continue to become more discriminatory in the amount they spend,” he said at the time. Going forward, McDonald’s will be “focused” on affordability.
Mickey D’s exceeded expectations, so Coca-Cola wasted no time in investing marketing dollars to extend its $5 Meal Promotion.
“What McDonald’s has struggled with and why I think we’re kind of at an inflection point is the value proposition,” Senatore said. “McDonald’s menu price increases were ahead of many of its peers. …Consumers are well aware of that.”
Sam Oches, editorial director of the restaurant and food group at market research firm Informa, said the company is by no means alone in making a course correction. “Everyone has been trying to find a solution to the traffic decline trend all year long,” he said.
Oches said arriving at the right formula is not easy, as it still needs to adapt to changes in consumer behavior that are in flux. Maybe you can still get it tomorrow. ” But even if you have more than a few million visitors, it still has a big impact. ”
Mr. Senatore partially credited McDonald’s ability to tackle this problem to its size, with more than 14,000 restaurants in the U.S. alone. “I can’t overstate how important relative size is in this industry,” she said. “They just have bigger bullhorns.”
Other large loudspeaker welding companies have joined the trend of lowering prices this year, fearing losing their own customers or trying to cope with exits already underway. Amazon, Walmart, Target, Best Buy, Walgreens, and JetBlue are just a few of the major consumer brands that have leaned into discounts this year. The pace of price increases slowed last month to the lowest since February 2021, a reality that remains in play as consumers adjust to higher prices even as the inflation fever subsides.
Still, 64% of consumers said they noticed more price increases at quick-service restaurants than other types of restaurants in September, according to a survey by food and beverage market research firm Datasential. As a turbulent election season draws to a close, politicians are still focused on the cost of fast food. A group of Democratic senators this month accused McDonald’s of outpacing inflation in menu prices and accused the company of seeking to profit “at the expense of people’s ability to put food on the table.”
In this situation, analysts expect discounts and promotions to continue. “In a normalized environment, I don’t think value will be as important as it is now,” said Jim Sarella, a restaurant industry analyst at financial firm Stevens.
And so far, the strategy is largely working. Retail sales rose 0.4% last month, beating expectations.
“September’s numbers show that consumers are willing to spend where they see value,” Jack Kleinhenz, chief economist at the National Retail Federation, said in a statement. “It’s clear that consumers continue to support the economy, and retail conditions remain strong going into the holiday season.”
For McDonald’s, an E. coli outbreak that sickened 75 people and killed one in 13 states didn’t shake Wall Street’s confidence in the company. The company’s stock is in a “pretty volatile situation,” Mr. Senatore acknowledged, but it has been roughly flat since the beginning of the year. Analysts at JPMorgan recently said the company’s stock is “trading on emotion and uncertainty,” pointing to strong momentum from McDonald’s strong and flexible supply chain and $5 meals.
It remains to be seen whether these expectations will materialize in the fourth quarter and into next year. But for now, the company has managed to weather the tough times.
“They are constantly fighting for attention, loyalty and trust, innovating their menus and rolling out loyalty programs,” Oches said. “That’s a battle.”
