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McDonald’s suffered a second straight year of sales decline in the third quarter as it struggled with weak consumer demand in international markets such as France, Britain, the Middle East and China.
The fast-food chain reported Tuesday that global comparable sales fell 1.5% from a year ago, more than the 0.6% decline estimated in a Visible Alpha survey of analysts.
The sequential decline in McDonald’s sales follows a 1% drop in the second quarter as the company struggles to regain business from customers squeezed by years of food inflation and 2020 coronavirus infections. This is the first time since the pandemic. Especially people from low-income households.
Third-quarter sales rose 3% to $6.9 billion, beating consensus estimates of $6.8 billion. However, net profit fell 3% to $2.26 billion, slightly below expectations of $2.3 billion.
After years of food inflation, consumers are hesitant about the prices of burgers, fries, and soft drinks. CEO Chris Kempczinski said McDonald’s has long been considered a leader in affordable food, but “the value leadership gap has narrowed.”
In response, McDonald’s has launched deals such as 4-euro Happy Meals in France, “3-for-3” meal sets in the U.K. and $1 Canadian coffee in Canada, Kempczinski said.
In the US, McDonald’s has extended the $5 meal deal it introduced in the summer. There are signs that the promotional efforts are working, with sales at McDonald’s roughly 13,500 U.S. restaurants rebounding from a second-quarter decline and rising 0.3%.
Even as U.S. sales have rebounded, hopes for a comeback have been overshadowed by an E. coli outbreak linked to onions used in Quarter Pounder burgers in parts of the central United States. Since the announcement a week ago, more than 70 people have become ill and one person has died due to the spread of infection.
McDonald’s resumed selling Quarter Pounders in Colorado this week after health officials and the company traced the source of the contamination to a single vegetable processor in Colorado. McDonald’s has stopped purchasing onions from its supplier.
Chief Financial Officer Ian Bowden told analysts that while the incident was unlikely to have a material impact on the company’s financial outlook for this year, U.S. sales and customer traffic have declined since the incident. He pointed out that it is decreasing.
“We are confident that the most significant events have passed and our immediate focus is on restoring consumer confidence,” Borden said. McDonald’s stock was unchanged as of midday Tuesday.
Worldwide comparable sales include restaurants that have been open for at least 13 months in both the U.S. and foreign markets. In McDonald’s international markets, where the company operates and franchises restaurants, sales fell 2.1% “due to the impact of France and the United Kingdom,” the company said.
Like-for-like sales in the international licensing market decreased by 3.5%. McDonald’s cited the impact of the Middle East wars and sluggish sales in China, despite growth in its Latin American business.
McDonald’s began offering collectible cup sets in more than 30 countries in August, which Bernstein Research says could lead to comparable sales increases. As of June, the company had 42,406 restaurants around the world, 95% of which were franchised.
