CHICAGO — McDonald’s Corp. has not been immune to the slowdown in the quick-service restaurant sector that gathered momentum in the second quarter and continued into the third quarter, said Chris Kempczinski, chief executive officer.
Speaking to analysts during an Oct. 29 conference call, Kempczinski said cost-conscious consumers choosing to eat at home more often weighed on the Chicago-based restaurant chain’s earnings in the third quarter. While the company’s performance so far this year “has fallen short of our expectations,” he said its “accelerating the arches” growth and innovation strategy is guiding those factors within its control to impact performance.
Net income in the third quarter ended Sept. 30 totaled $2.26 billion, equal to $3.13 per share, down 3% from $2.32 billion, or $3.17 per share, in the same period a year ago. Adjusted earnings were $3.23 per share, up 1% from the third quarter of 2023, the company said.
Total third-quarter revenues came in at $6.87 billion, up 3% from $6.69 billion a year ago.
“We’re encouraged by signs of progress in the third quarter and the more consistent market share traction we are seeing, especially in the US, which included strong, compelling value platforms, which is fundamental to the McDonald’s brand promise; menu innovation, which excited our customers with great-tasting food; and strong marketing prowess that drove engagement on higher-margin core items,” Kempczinski said.
As part of a value platform, McDonald’s rolled out a successful “$5 Meal Deal” in late June to bring back consumers increasingly focused on affordability. The company announced Sept. 12 the $5 Meal Deal will be extended into December by most local markets.
The prices of some of McDonald’s most popular menu items, such as the Big Mac and the Quarter Pounder, have risen by at least 20% in the past few years.
Global comparable sales fell 1.5% in the third quarter, compared with an 8.8% gain in the prior year, while US sales inched up 0.3%, according to the company. The US results reflected average check growth, which was partly offset by slightly negative comparable guest counts, McDonald’s said.
Sales at company-operated restaurants totaled $2.66 billion in the third quarter, which was a 4% increase from the previous year. At franchised outlets, third-quarter sales totaled $4.09 billion, up 1%.
In the company’s International Operated Markets, performance was affected by negative comparable sales driven by France and the United Kingdom, the company said. In International Developmental Licensed Markets, the Middle East war and negative comparable sales in China offset positive comparable sales in Latin America.
McDonald’s shares fell slightly following the earnings release and have now dipped 6.1% since an E. coli outbreak related to consumption of the company’s Quarter Pounder burger was announced Oct. 23.
The outbreak, which the FDA said has resulted in 1 death and 75 illnesses across 13 states, was subsequently linked to slivered onions and not to beef patties used in the McDonald’s menu item.
On the Oct. 29 earnings call, Kempczinski apologized for the situation and said the onions had been removed from the company’s supply chain. He described the outbreak as “being behind us.”
“The recent spate of E. coli cases is deeply concerning and hearing reports how this has impacted our customers is wrenching for us,” he said. “On behalf of the entire system, we are sorry for what our customers have experienced.”
Kempczinski added that, for more than 70 years, “McDonald’s commitment to food safety has been uncompromising,” and that the last serious public health issue in the United States associated with the company had occurred more than 40 years ago.
The full impact of the E. coli recall will be reflected in McDonald’s fourth-quarter earnings report.