- McDonald’s CEO acknowledges end of ultra-cheap prices, aims to bring back affordability to boost sales.
- Fourth-quarter global same-store sales growth falls short of analysts’ estimates, partially due to increased menu prices.
- McDonald’s faces challenges in the Middle East amid boycott campaigns and protests, experiencing a “meaningful business impact.”
Additional Coverage:
- McDonald’s is promising ‘attention to affordability’ after the price of Big Mac meals hits $18 (fortune.com)
The CEO of McDonald’s, Chris Kempczinski, has acknowledged that the days of ultra-cheap prices at the fast food chain are over, and he aims to bring back “affordability” in order to boost sales. The company experienced lower-than-expected sales in the last quarter, partially due to increased menu prices. Kempczinski stated that there would be a focus on affordability in the coming years.
McDonald’s global same-store sales growth for the fourth quarter was 3.4%, falling short of analysts’ estimates of 4.79%. This is in contrast to the third quarter when same-store sales increased by 8.8% before the price hikes. The higher menu prices have affected low-income customers, with many opting for home cooking as grocery costs have decreased.
However, Kempczinski’s definition of affordability may not align with customer expectations. Prices at McDonald’s are still expected to increase, albeit at a slower pace compared to last year. Analysts predict a 2% to 3% increase, down from 10% in the previous year.
McDonald’s leadership team had anticipated benefiting from a difficult economy, banking on customers choosing the fast food chain as rising costs limited their affordable options. Kempczinski viewed the current cost of living crisis as an opportunity for McDonald’s to excel.
McDonald’s has also faced challenges in the Middle East, with protests and boycott campaigns against Western brands perceived to have a pro-Israeli stance. The company experienced a “meaningful business impact” following controversy surrounding the Israel-Hamas war. Starbucks has similarly revised its sales forecast due to a decline in sales and traffic in the Middle East, along with calls for a boycott.
Fortune has reached out to McDonald’s for comment on these matters.