CHICAGO – McDonald’s Corp. has seen some low-income consumers trade down or move away from the company due to elevated menu prices, and management has set a goal of bringing many of them back in the year ahead.

“Call it $45,000 and under,” said Christopher J. Kempczinski, president and chief executive officer, during a Feb. 5 conference call to discuss fiscal 2023 results. “That consumer is pressured. From an industry standpoint, we actually saw that cohort decrease in the most recent quarter. Particularly, I think, as eating at home has become more affordable. There’s been much less pricing that’s been taken more recently on packaged food. So, you’re seeing that eating at home is becoming more affordable (and) that, I think, is putting some pressure from an IEO (informal eating out) standpoint on that low-income consumer.”

He added that McDonald’s continues to gain share among middle- and high-income consumers and that the marketplace battle is for that low-income consumer. In the year ahead, he sees price as being more important than a value message to engage low-income consumers.

“We are set up well to be able to go after that,” Kempczinski said. “We have our D123 (everyday value) platform and I think you're going to see probably some activity there in the US at the local level to make sure we continue to provide good value for that low-income consumer.”

The focus on low-income consumers as an avenue for growth in the next year follows a strong year for McDonald’s. For the year ended Dec. 31, the company’s net income rose 37% to $8.5 billion, equal to $11.56 per share on the common stock, and compared with $6.2 billion, or $8.33 per share, the year before.

Annual sales rose 10% to $25.5 billion, up from $23.2 billion in fiscal 2022.

“In 2023, we achieved global comp sales growth of 9%, delivered guest count performance of nearly 3% globally, with positive traffic across each of our segments and maintained our leading market share across most of our major markets,” Kempczinski said.

In the United States, comparable sales rose 8.7% compared with fiscal 2022, according to McDonald’s, and 4% during the fourth quarter. While the company was challenged by higher menu prices in the United States and Europe, it also faced significant headwinds due to conflict in the Middle East.

“As a system, we’ve navigated countless challenging environments since we first opened our doors in 1955,” said Ian Frederick Borden, global chief financial officer. “This past quarter was no exception, and our thoughts remain with the families and communities impacted by the war in the Middle East. As Chris and I have both mentioned before, the war has meaningfully impacted our IDL (international developmental licensed markets) segment performance, resulting in fourth quarter comp sales of less than 1%.”

The company expects its IDL segment to remain challenged in 2024 and for many consumers to remain price conscious.

“As we look to 2024, with elevated absolute prices and muted consumer confidence, we believe that consumers will continue to be more discriminating with their dollars,” Kempczinski. “But we expect our focus on our MCDs will continue to drive growth across our business. And from a historical perspective, we know our resilience is rooted in our ability to adapt in any environment.”

In answering an analyst’s question about the outlook for 2024, Borden noted some caution.

“… We had a slower start to the year,” he said. “I think there are a couple of important reasons for that. Firstly, we had a really strong start to 2023. So, obviously, we’re lapping against that. And then I think you’ll remember a year ago, we talked about just the abnormally mild weather that we were dealing with as a tailwind benefit in the beginning of ‘23 in both North America and Europe, and so we’re obviously working against that as well.”