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McDonald’s Execs Promise to be Price Sensitive in Q2, as ‘All Income Cohorts Are Seeking Value’

McDonald's price sensitive

McDonald’s CEO Chris Kempczinski said on Tuesday that the fast-food chain will focus on affordability and value messaging in the near-term, with “good price points” in every market, as consumers continue to be inflation weary.

During its Q1 2024 earnings call, the burger chain’s executives promised to be thoughtful about any further price increases.

“The consumer is certainly being very discriminating in how they spend their dollar, and the inflation that has occurred over the last couple of years in the U.S. I think surely created that environment,” Kempczinski said. “I think it’s important to recognize that all income cohorts are seeking value.”

McDonald’s posted global same-store sales growth of 1.9% in its first quarter, falling short of analyst estimates of 2.35%. The company raised prices by roughly mid- to high-single-digit percentages over the last year in response to rising prices in eggs and other raw materials, as Reuters reported.

The burger chain’s leaders said broad-based consumer pressures exist worldwide, with flat-to-declining traffic in several markets. They expect restaurant industry traffic to be negative throughout 2024.

McDonald’s execs acknowledged that “macro headwinds” have been more significant than they anticipated so far this year.

As a result, some of McDonald’s near-term strategies will include:

  • Carefully considered pricing. Executives said they want to make sure they offer “an entry-level meal bundle,” for example.
  • Driving growth through investment in the “three Ds”: delivery, drive-thru, and digital.
  • Offering a larger “more satiating” burger. “Certainly, you can expect that we will use menu innovation,” Kempczinski said, “to find ways to engage our customers.”

On Tuesday, McDonald’s execs also stressed the positives they’ve seen early this year. For example, delivery sales hit all-time highs for the chain in the U.S. in Q1. The chain’s U.S. same-store sales increased 2.5% in the first quarter, as Restaurant Business detailed. Kempczinski and CFO Ian Borden said the burger giant’s customer satisfaction scores have increased recently in the U.S.

According to Placer.ai, visits to McDonald’s were up 1% in March year-over-year. Placer.ai also noted that McDonald’s experimental CosMc’s stores have received a strong reception, and more are on the way.

“We’ve just now rebuilt franchise-level margins back to where we were in 2019,” Kempczinski said Tuesday.

“We’re seeing improvement across all of our major markets on satisfaction,” the CEO added. “We have seen that relative superiority on affordability has declined. … It’s important to note that we still are viewed as a superior value proposition, but the degree of gap in a few markets has narrowed.”