McDonald’s saw a key sales metric jump in the third quarter as it doubled down on discount meals – but it fell short on earnings as it warned anxious Americans have cut back on dining out.
US same-store sales increased 2.4% for the second straight quarter. That beat estimates of a 1.9% rise – though McDonald’s attributed this to a larger average check, implying diners are paying more for their meals despite the fast-food industry’s “value wars.”
Overall same-store sales rose 3.6%, reversing a decline of 1.5% from the same period last year.
McDonald’s CEO Chris Kempczinski said the results are “a testament to our ability to deliver sustainable growth even in a challenging environment.”
Shares in the world’s largest fast-food chain jumped 2% Wednesday morning.
But the Golden Arches continued to warn that Americans are dining out less often, especially low-income diners.
“We continue to see a bifurcated consumer base with [quick-service restaurant] traffic from lower income consumers declining nearly double digits in the third quarter, a trend that’s persisted for nearly two years,” Kempczinski said during a post-earnings call Wednesday.
“In contrast, QSR traffic growth among higher income consumers remains strong, increasing nearly double digits in the quarter.”
It reported net income of $2.28 billion, or $3.18 a share, up from $2.26 billion the same time last year. A higher effective tax rate weighed on earnings in the third quarter.
Excluding restructuring charges and other one-time items, McDonald’s earned $3.22 a share, missing estimates of $3.33 a share.
Revenue rose 3% to $7.08 billion, missing estimates of $7.1 billion.
McDonald’s warned that it expects economic concerns to continue weighing on customers well into 2026.
Like many other fast-food chains, McDonald’s has been leaning heavily into value meals to win over these cash-strapped consumers.
It brought back its Snack Wraps for the first time in nine years at a low $2.99 price tag. Chief Financial Officer Ian Borden said it was one of the most popular chicken launches in recent US history – with nearly one in five customers purchasing a Snack Wrap in the first four weeks.
McDonald’s added Extra Value Meals — including $5 breakfast combos and $8 dinner meals — back to menus in September.
“I think sometimes there’s this idea that value only matters to low-income [consumers],” Kempczinski said.
“But value matters to everybody, whether you’re upper income, middle income, lower income, feeling like you’re getting good value for your dollar is important.”
McDonald’s also reported strong global growth. Same-store sales in its international operated markets division, which includes Australia and Canada, rose 4.3%. The same metric jumped 4.7% in its international developmental licensed markets segment, thanks to growth in Japan.
The company is banking on the return of its Extra Value Meals, McDonald’s Monopoly deals and new drink additions inspired by its CosMc spin-off to boost US sales again next quarter.
It is likely facing a flattering comparison, since an E. coli outbreak – which sickened more than 100 people and killed at least one – heavily weighed on domestic sales in the fourth quarter last year.
The company might see sales growth slow in its international divisions, however, according to Borden.
[Notigroup Newsroom in collaboration with other media outlets, with information from the following sources]
