New York (AFP) – McDonald’s profits rose in the second quarter behind a rebound in US sales, but executives said Wednesday that low-income consumers remained under economic stress. The fast-food chain notched a 2.5-percent rise in US comparable sales after the same benchmark shrunk by 3.6 percent in the first quarter. McDonald’s Chief Executive Christopher Kempczinski described the US consumer base as “bifurcated,” with weakness in low-income consumers a reason for lingering caution on the outlook. He stated this at the outset of an earnings conference call.
Later, in response to an analyst’s question, Kempczinski noted that “real incomes are down” for this population despite higher wages. “There’s a lot of anxiety and unease with that low-income consumer,” he added. “I think we could all speculate on the reasons for that, probably tariffs and the impact that might have, be questions around the employment situation.” He further explained that people are either skipping meals like breakfast or trading down, either within their menu or by opting to eat at home.
In terms of the results, McDonald’s reported an 11-percent rise in profits to $2.3 billion, while revenues increased five percent to $6.7 billion. Global comparable sales increased 3.8 percent. Executives pointed to strength in Japan, while promotions in Germany for the Chicken Big Mac and in France for the Big Arch burger also boosted demand.
McDonald’s has also unveiled meal promotions in the United States such as the $5 Meal Deal and the Snack Wrap for $2.99. However, executives mentioned that they were still working to implement the offering throughout its network. US franchisees have sometimes resisted such promotions due to profit concerns.
“Too often” consumers may drive up to a McDonald’s “and you’re seeing combo meals that could be priced over $10, and that absolutely is shaping value perceptions in a negative way,” Kempczinski said. “We’ve got to get that fixed,” he added, mentioning that the company is holding “active and productive” conversations with franchisees. Shares of McDonald’s jumped 3.0 percent near midday.
© 2024 AFP
