McDonald's has a value problem; Q2 same-store sales fall
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Illustration: Rebecca Zisser/Axios
McDonald's isn't offering enough of what its main consumers want.
Between the lines: Higher prices — and more specifically, a sagging value proposition — came back to bite the fast-food giant last quarter.
Driving the news: While McDonald's $5 meal deal began to pull some people back, fewer customers visited the company's U.S. restaurants in the second quarter than a year ago, sending same-store sales down 0.7%, the company said Monday morning.
- The value deals have resonated with the company's "two lowest income cohorts," those earning under $45,000, and $45,000–$75,000, CEO Chris Kempczinski told analysts this morning following the company's earnings report release.
- But that "hasn't yet translated into sales."
"Consumers still recognize us as the value leader versus our key competitors, but it's clear that our value leadership gap has recently shrunk," Kempczinski added. "We are working to fix that with pace."
The big picture: Fast food restaurants have had some of the sharpest price hikes since the pandemic.
- Would-be customers have been opting to eat at home where costs have grown more modestly than the price of dining out, fueled by higher wages and inflated food costs.
- Customer pushback has forced several companies in the space to launch competing value meals in recent months to win back customers.
Yes, but: A value item, or two, isn't the only thing that matters to shoppers.
- "It's also clear to us that in a number of markets you need to have a broader value platform and that trying to move the consumer with narrow offerings that are one item or a few items is just not sufficient for the context that we're in," Kempczinski added.
