McDonald's suffers second straight decline in quarterly sales

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McDonald's suffered a second consecutive decline in sales in the third quarter, as it suffered from weak consumer demand in international markets such as France, the United Kingdom, the Middle East and China.

The fast food chain reported Tuesday that global comparable sales fell 1.5 percent year over year, more than the 0.6 percent decline estimated in a Visible Alpha survey of analysts.

The decline was McDonald's first consecutive decline in sales since the COVID-19 pandemic in 2020, following a 1 percent decline in the second quarter, as the chain struggles to claw back business from customers stressed by years of food price inflation. Especially those who belong to low-income families.

Revenue in the third quarter rose 3 percent to $6.9 billion, beating consensus expectations of $6.8 billion. However, net profit fell 3 percent to $2.26 billion, slightly below estimates of $2.3 billion.

After years of food price inflation, consumers are rejecting the cost of burgers, fries and soft drinks. McDonald's has long been viewed as a leader in affordable food, “but our leadership value gap has narrowed,” said CEO Chris Kempczinski.

In response, McDonald's has launched offers such as €4 Happy Meals in France, “three for £3” meal packs in the UK, and C$1 coffee in Canada, Kempczinski said.

In the United States, McDonald's has extended the $5 meal offer that was introduced over the summer. There are signs that the promotional activity has been successful: comparable sales at McDonald's about 13,500 U.S. restaurants rebounded after falling in the second quarter, rising 0.3 percent.

Although sales in the United States have risen, hopes for a recovery have been dampened by an outbreak of E. coli bacteria linked to onions used in Quarter Pounder hamburgers in parts of the central United States. The outbreak has resulted in more than 70 cases of the disease and one death since it was announced a week ago.

McDonald's is resuming sales of Quarter Pounders in the region this week after health authorities and the company traced the contamination to a single vegetable processor in Colorado. McDonald's has stopped purchasing onions from the supplier.

Ian Borden, chief financial officer, told analysts that the accident was unlikely to have a material impact on the company's financial outlook this year, but noted that sales and traffic in the United States had declined since the accident.

“We certainly believe the most significant events are behind us, and the work we need to do now is focused on restoring consumer confidence,” Borden said. McDonald's shares were unchanged at midday Tuesday.

Global comparable sales include restaurants open at least 13 months in both U.S. and foreign markets. In McDonald's' international markets where it operates and franchises restaurants, comparable sales fell 2.1 percent, “driven by France and the United Kingdom,” it said.

Comparable sales in international licensed markets declined 3.5 percent. McDonald's pointed to the effects of war in the Middle East and weak sales in China, even as its business in Latin America grows.

In August, McDonald's began offering sets of the collectible mugs in more than 30 countries, which research firm Bernstein said could lead to an increase in comparable sales. The company had 42,406 restaurants worldwide as of June, 95 percent of which were franchised.