McDonald’s (MCD) is facing a lot of headwinds, and the gusts are making it more challenging for the company to significantly repair its weak sales.
The fast-food chain just recently revealed its third-quarter earnings report for 2024. During the quarter, McDonald’s global comparable sales declined by 1.5% year-over-year, while its net income dipped by 3%.
💰💸 Don’t miss the move: SIGN UP for TheStreet’s FREE Daily newsletter 💰💸
Its U.S. sales, however, faced a small increase of 0.3%, which it claims in the report was “partly offset by slightly negative comparable guest counts” in its stores.
Related: McDonald’s new $5 Meal Deal isn’t going as planned (so far ...)
During a recent earnings call, which discussed the report, McDonald’s CEO Chris Kempczinski claimed that the company continues to suffer from a startling trend in the quick-service restaurant (QSR) industry.
“QSR traffic has remained pressure, reflecting industrywide challenges,” said Kempczinski. “And while we anticipated a challenging environment in 2024, our performance so far this year has fallen short of our expectations.”
Many consumers across the U.S. have been avoiding fast-food restaurants after facing multiple price increases over the past few years. According to a recent survey from LendingTree, 62% of Americans claimed they are eating less fast food due to high prices.
Despite struggling to overcome that hurdle, McDonald’s Chief Financial Officer Ian Borden said during the earnings call that U.S. consumers are responding well to its new $5 Meal Deal. The deal, which ends in December, offers customers a $5 meal that includes a McChicken, four-piece chicken nuggets or a McDouble, along with fries and a drink.
“For the first time in over a year, we gained share with lower-income consumers,” said Borden. “And we also saw that customers that were buying that $5 meal were also visiting us more frequently.”
McDonald’s slight boost in U.S. sales, however, faces a major threat due to a recent health scare that recently plagued the company’s U.S. restaurants.
McDonald's sales decline amid E. coli outbreak
Last week, McDonald's Quarter Pounder was removed from restaurants across the country after federal officials announced that the menu item was linked to one death and roughly 75 people being sickened by an E. coli outbreak.
McDonald’s sales in the U.S. are already starting to be negatively impacted by the incident.
Related: McDonald’s reveals which menu items customers can kiss goodbye
“There's been an impact in the U.S. business as a result of the food safety incident,” said Borden. “And that positive momentum that I just talked about, we saw that shift to kind of having daily negative sales and guest count results since the beginning of the food safety incident.”
According to recent data from Placer.ai, McDonald’s restaurant visits declined by 6.4% year-over-year on Oct. 23, which is when the E. Coli outbreak was announced. By Oct. 24, visits shrunk by 9.1%, and on Oct. 25, it decreased by 9.4%.
More Food + Dining:
- Chipotle tests a new way to ensure that customers get what they pay for
- Even deals can’t reverse startling trend in the fast-food industry
- McDonald’s is facing the brutal aftermath of price increases
“Historically, food safety events like these can impact visitation trends for an extended period, but because the company was able to identify and communicate the source of the outbreak while implementing preventative measures, it should reduce the negative impact on visit trends,” said R.J. Hottovy, head of analytical research at Placer.ai.
McDonald’s will add Quarter Pounders back onto its menus in the coming week after its beef suppliers produced a new supply of beef patties.
“The last serious public health issue in the U.S. associated with McDonald's occurred more than 40 years ago,” said Kempczinski during the earnings call. “The recent spate of E. coli cases is deeply concerning, and hearing the reports of how this has impacted our customers has been wrenching for us. On behalf of the entire system, we are sorry for what our customers have experienced.”
Related: Veteran fund manager sees world of pain coming for stocks
