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McDonald’s experienced a second consecutive decline in sales during the third quarter, as it grappled with weak consumer demand in international markets like France, the UK, the Middle East, and China.
The fast-food giant reported a 1.5% year-on-year decrease in global comparable sales, surpassing the 0.6% drop anticipated by analysts in a Visible Alpha survey.
This marks McDonald’s first consecutive decline in sales since the onset of the Covid-19 pandemic in 2020, following a 1% decrease in the second quarter. The company is working to regain customers who have been financially strained by years of food inflation, particularly those from lower-income households.
While revenue in the third quarter rose by 3% to $6.9 billion, slightly exceeding the consensus forecast of $6.8 billion, net profit fell by 3% to $2.26 billion, just below the estimated $2.3 billion.
Consumers are increasingly hesitant to pay for burgers, fries, and soft drinks due to rising costs. Chris Kempczinski, McDonald’s CEO, acknowledged that the company has historically been known for offering affordable food, but its competitive pricing advantage has diminished.
In response, McDonald’s has introduced various promotions such as €4 Happy Meals in France, “three for £3” meal bundles in the UK, and C$1 coffee in Canada. The company has also extended a $5 meal deal in the US following its successful introduction during the summer. Promotional efforts have shown positive results, with comparable sales at McDonald’s approximately 13,500 US restaurants rebounding by 0.3% after a dip in the second quarter.
Despite the improvement in American sales, hopes for a full recovery have been dampened by an E. coli outbreak linked to onions used in Quarter Pounder hamburgers in parts of the central US. The outbreak has resulted in over 70 cases of illness and one fatality since it was reported a week ago.
McDonald’s plans to resume Quarter Pounder sales in the affected region this week after identifying a single vegetable processor in Colorado as the source of contamination. The company has ceased purchasing onions from this supplier.
Chief Financial Officer Ian Borden reassured analysts that the incident is not expected to significantly impact the company’s financial performance for the year. However, he acknowledged a decline in US sales and foot traffic since the outbreak, emphasizing the importance of rebuilding consumer trust.
Global comparable sales include restaurants open for at least 13 months in both the US and international markets. In McDonald’s foreign markets, where it operates and franchises restaurants, comparable sales declined by 2.1%, primarily driven by France and the UK.
Comparable sales in international licensed markets dropped by 3.5%, with McDonald’s attributing this decline to the impact of the Middle East conflict and weaker sales in China, despite growth in its Latin American business.
In August, McDonald’s launched collectible cup sets in over 30 countries, a move that Bernstein Research believes could boost comparable sales. As of June, the company operated 42,406 restaurants worldwide, with 95% of them being franchised.