McDonald's (MCD, Financial) shares remain steady despite reporting mostly in-line Q1 results. The notable issue was a -3.6% decline in U.S. comparable sales, marking the worst quarter since the pandemic. This drop is attributed to financial constraints and uncertainty among lower-income consumers.
Key Highlights:
- Global comparable sales fell by -1.0%, down from +0.4% in Q4. This marks the third negative global comp in four quarters, raising concerns about weak consumer demand both in the U.S. and internationally.
- U.S. comparable sales declined by -3.6%. Quick Service Restaurant (QSR) traffic from low-income consumers dropped nearly double digits year-over-year. Middle-income consumer traffic also saw a significant decline, indicating broader economic pressures. However, traffic from higher-income consumers remains robust.
- To address these challenges, McDonald's is focusing on value with its EDAP (everyday affordable price) menus and $5 meal bundles in major markets. In the U.S., the McValue platform was launched, akin to the Saver menu in the UK and the Loose Change menu in Australia.
- McDonald's is encouraged by the positive response to its Minecraft movie campaign and is excited about new menu items, including the nationwide launch of McCrispy Chicken strips in the U.S.
Investors appear unfazed by the U.S. comp decline, possibly due to expectations of weak Q1 results. The strong overall market performance today may also be supporting MCD shares. Looking forward, McDonald's anticipates improved guest count and market share performance, driven by its focus on value, as it compares against weaker global comps in the upcoming quarters.
