McDonald's is introducing hot deals and tasty offers to boost cooling sales as high prices deter cost-conscious consumers.
The burger behemoth reported that customers, wary of inflation, are dining out less frequently across several major markets. In the first quarter, fast food patronage in the U.S., Australia, Canada, Japan, the UK, and Germany either stagnated or declined.
During a conference call with investors on Tuesday, McDonald's President and CEO, Chris Kempczinski, tackled the issue head-on.
"The consumer is certainly being very discriminating in how they spend their dollar," Kempczinski admitted. "It may be more pronounced with lower-income consumers, but it's important to recognize that all income cohorts are seeking value."
Persistent inflation has negatively impacted Americans' perceptions of economic well-being. According to the Conference Board's report on Tuesday, consumer confidence in April plummeted to its lowest level since mid-2022, attributed to ongoing high prices.
McDonald's reported that its global same-store sales, which refer to sales at outlets open for at least a year, experienced a 1.9% growth during the January-March quarter. However, this figure fell short of Wall Street's expectation, which predicted a 2.1% rise, according to the Associated Press.
McDonald's CEO Teased a Combo of Lower Prices and Savvy Marketing
McDonald's warned investors to expect slower growth this year after the post-pandemic sales surge. As grocery prices have fallen, a significant number of consumers are opting to eat more meals at home. Despite this shift, the increases in same-store sales McDonald's reported for the first quarter fell short of the typical 3% to 4% growth the company generally observes annually.
In the U.S., McDonald's witnessed a 2.5% increase in same-store sales during the first quarter, a rise primarily attributed to the price increases implemented last year. During the call, Kempczinski reviewed the McDonald's app and observed several available deals in his vicinity, highlighting a special offer of a Big Mac for 29 cents with the purchase of another. Additionally, Kempczinski mentioned that 90% of U.S. McDonald's locations are providing meal bundles at the cost of $4 or less.
Kempczinski pointed out that McDonald's needs one heck of a super-sized value proposition, all backed up by some seriously beefy marketing campaigns. He highlighted that, in certain regions, the brand is falling behind competitors in how customers perceive its value and affordability. For instance, Wendy's is enhancing its appeal by offering free fries with every medium burger purchase.
"There's a lot of great value out there, but everyone else has a value message too," Kempczinski explained.
