McDonald's suffers decline in US sales amid volatile economy, worst since 2020
A reduction of low and middle-income customers is one of the main reasons for the drop in sales, Chris Kempczinski, McDonald's chairman and CEO, said during an earnings call.
McDonald's is the latest fast food chain to report a decrease in sales amid a turbulent and volatile U.S. economy impacted by tariffs and inflation.
The Chicago, Illinois-headquartered chain announced the decline on May 1 in an earnings report that shared results of its first quarter, which ended on March 31. According to the report, McDonald's had a 3% drop in revenue, and same-store sales in the U.S. dropped 3.6% from the prior year, marking the most significant decline since the COVID-19 pandemic in 2020.
“McDonald's has a 70-year legacy of innovation, leadership, and proven agility, all of which give us confidence in our ability to navigate even the toughest of market conditions and gain market share," Chris Kempczinski, McDonald's chairman and CEO, said in the report. "Consumers today are grappling with uncertainty, but they can always count on McDonald’s for both exciting new menu items and delicious favorites for exceptional value, from a brand they love.”
Like McDonald's, other fast food chains are experiencing similar economic issues, with some even closing or considering closing locations, such as Jack in the Box, Wendy's and Burger King. The number of struggling chains could grow as they begin to feel the effects of President Donald Trump's tariffs, which are expected to make ingredients even more pricey over time.
Why is McDonald's experiencing a decline in sales?
During an earnings call, Kempczinski attributed the decrease in sales to the volatility of the fast food industry and a drop in lower and middle-income customers compared to a year ago.
Meanwhile, higher-income traffic remains steady, which the McDonald's CEO said illustrates "the divided U.S. economy where low and middle-income consumers in particular are being weighed down by the cumulative impact of inflation and heightened anxiety about the economic outlook."
What is McDonald's doing to increase sales?
According to Kempczinski, McDonald's is "expanding and refining" its value items to meet the needs of low and middle-income customers. He added that McDonald's now has "everyday affordable price menus" and "entry-level meal bundles" in each of its big five internationally operated markets.
The fast food chain does offer a McValue menu, which includes items like the McDouble, McChicken and 4-piece Chicken McNuggets at discounted prices. Additionally, McDonald's $5 Meal Deal offers a variety of classic meals.
"These are the building blocks of what good value means to us," Kempczinski said.
Kempczinski also said McDonald's intends to continue introducing "innovative new products" like the McCripsy Strips, and executing "world-class promotional and marketing campaigns" to bring customers back. He referenced the partnership McDonald's did in conjunction with the "Minecraft Movie," which included in-store collectibles for "fans young and old."
Are all fast food chains experiencing a decline in sales?
While McDonald's and others are feeling the weight of the struggling U.S. economy, some other fast food chains are not, including Taco Bell and Kentucky Fried Chicken (KFC). The chains reported an increase in guest traffic due to recent promotional deals they've been pushing.
Yum! Brands, Inc., which owns KFC, Taco Bell, Pizza Hut, and The Habit Burger Grill, reported its first quarter ended (March 31) with an overall 13% increase. Taco Bell U.S. same-store sales growth was 9%, while KFC International's same-store sales grew 7%.