Price hikes fuel a McDownturn
McDonald’s earnings fell short of expectations as spiking menu prices have begun to chase away inflation-battered, low-income families.
McDonald’s reported first-quarter net income of $1.93 billion, or $2.66 per shar,e on Tuesday.
Excluding restructuring charges, the Golden Arches earned $2.70 per share. Though it was up from the year-ago period, it missed Wall Street’s $2.72-pershare expectations.
CEO Chris Kempczinski said on McDonald’s earnings call that “it is clear that broad-based consumer pressures persist around the world.”
“Consumers continue[d] to be even more discriminating with every dollar that they spend as they faced elevated prices in their day-to-day spending,” he added of McDonald’s recent struggle to get inflation-squeezed consumers to cough up as much as $18 for a Big Mac.
Kempczinski emphasized to shareholders Tuesday that the company must be “laser focused” on affordability to win back low-income consumers.
Keeping US costs low has been a challenge this year, which started with roughly half the states hiking their minimum wage, including New York and California, where hourly minimums went to $16. The Golden State also implemented a rule on April 1 that requires fastfood workers to be paid $20 hourly.
Thus, in the first three months of this year, McDonald’s US samestore sales saw growth of 2.5%, missing expectations of 2.6%, as reports of eye-popping prices flooded in.
To offset rising labor costs, multiple franchisees across the country hiked menu prices, including Scott Rodrick, who said he’s already lifted menu prices 7% at the 18 McDonald’s locations he owns and is now considering reducing store hours.
Net sales rose 5% to $6.17 billion. The disappointing earnings report comes as the fast-food chain has been subject to boycotts and protests.
‘discriminating Consumers continue[d] to be even more with every dollar that they spend. ’
— McDonald’s CEO Chris Kempczinski