McDonald’s Corp. sales fell short of Wall Street expectations in the third quarter after weakness in international markets such as France, China, the UK and the Middle East. Sales at restaurants open at least 13 months fell 1.5%, worse than analysts had expected. The US was a bright spot, with growth of 0.3%, according to the company’s Tuesday statement.
McDonald’s is working to reverse a decline in traffic across all its geographies, caused by consumers’ reluctance to spend, high levels of inflation and a boycott of US brands in the Middle East. Efforts include worldwide price promotions and a limited-time release of vintage McDonald’s cups.
The stock slipped 0.4% at 2:22 p.m. Tuesday in New York. Shares have been little changed for the year, while the S&P 500 index has gained 22%.
McDonald’s said in a call with analysts that its $5 meal deal in the US improved the brand’s perception of affordability, resonated with low-income consumers and led to a positive change in guest numbers. The company said it will introduce a new value platform in early 2025.
“For the first time in more than a year, we gained share with low-income consumers,” said Chief Financial Officer Ian Borden.
Citigroup research analyst John Tower said in a note to clients that the results gave “encouraging insight” into how McDonald’s, despite its size, can rapidly change its sales trajectory by leaning into pricing and marketing.
Excluding certain items, earnings for the quarter were $3.23 per share. Total sales at franchised and company-owned restaurants remained stable.
Shock to America
Analysts and investors are already looking ahead to the fourth quarter, and trying to assess the impact of the E. coli outbreak linked to the company’s Quarter Pounders that became public last week. In response, the chain removed the burgers from 20% of its more than 13,000 US stores.
On Tuesday, McDonald’s said it did not expect any major impact from the issue. Still, Citigroup’s Tower said the outbreak hinders the chain’s near-term recovery.
The company said on October 27 that it would begin selling Quarter Pounders again after ruling out beef patties as the origin of the pathogen, saying instead pre-chopped onions were the likely culprit. The 900 restaurants that got their product from a supplier facility linked to the outbreak will serve burgers without onions.
McDonald’s sales fell across the U.S. after the outbreak became public, according to Bloomberg Second Measure data, which tracks debit and credit card transactions. In Colorado, where the most people have fallen ill, cases have dropped by 33%, according to cellphone mobility data from Placer.ai.
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