McDonald’s said its U.S. sales were improving on the back of promotions and marketing, following a decline in the third quarter as financially stretched consumers cut back on dining out.
Comparable sales in McDonald’s largest market fell 0.2 per cent in the quarter ended Sept. 30, missing analysts’ expectations for a 0.1 per cent fall, according to data compiled by LSEG. It was the company’s first such decline after five quarters of growth.
Customer visits to McDonald’s restaurants fell 4.6 per cent from a year earlier in the third quarter, according to Placer.ai, and rose recently due to the return of the chain’s Monopoly promotion and Halloween-themed Boo Buckets, though still below year-ago levels.
Its shares were up 4.7 per cent in early trading on Wednesday.
Executives highlighted gains from increased marketing towards entry-level meal deals and extra value meals alongside the return of promotional offers, including a US$2 breakfast sandwich and free fries with a $1 minimum purchase.
This helped bring back customers who were opting for cheaper alternatives from rivals, convenience stores and home-cooked meals as they face rising costs of living.
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Rival Burger King’s parent Restaurant Brands International topped sales expectations last week, helped by discounts and promotions. Yum Brands said on Tuesday Tex-Mex chain Taco Bell’s sales have returned to growth following a food safety-related hit.
“We’re taking the right steps to improve our near-term performance in the U.S., and I’m encouraged by our baseline traffic trends in September and October,” McDonald’s CEO Chris Kempczinski said.
McDonald’s announced its new turnaround strategy called “NEXT” in June. The plan includes simplifying operations, modernizing restaurant designs and investing in employee training, and aims to improve restaurant-level efficiency.
However, the company has faced mounting tensions with franchisees who have complained about eroding control and rising costs. McDonald’s executives in August said execution of its under-$3 menu was hurt by a third of franchisees that did not participate.
“How deep and how lasting those meal deals are will depend on whether McDonald’s or its franchisees are willing to carry the cost,” said Nagham Hassan, market analyst at eToro.
“If McDonald’s leaves the cost to franchisees, expect the deals to be patchy and the recovery slow.”
Kempczinski said corporate and US franchisees are in conversation about pricing, and the two sides are “in a good spot with the exception of this entry-level value.”
Kempczinski also said the company aims to expand the use of Archie, an AI assistant for drive-thru ordering, across the majority of U.S. restaurants by the end of 2027.
McDonald’s on Tuesday enlisted law firm White & Case to defend it against a lawsuit claiming the fast-food giant is using AI-powered tools to fix menu prices following a Reuters story from September that found McDonald’s uses machine learning algorithms to generate what the company calls the “optimal price” for each menu item at each restaurant.
The company’s quarterly global comparable sales rose 1.5 per cent, in line with expectations.
Adjusted earnings rose to $3.57 per share from $3.22 a year earlier, beating expectations of $3.38, helped by a decline in operating costs and higher gains on the sale of restaurants from franchising efforts.