For the first time in two years, McDonald’s has missed its quarterly profit estimates. The company shared that consumers looking to spend less, and the Middle East conflict played a role in the missed projections.
During a post-earnings call on Tuesday, McDonald’s CEO Chris Kempczinski shared that consumers are “being very discriminating in how they spend their dollar[s],” Reuters reported.
“I think it’s important to recognize that all income cohorts are seeking value,” the CEO said, as the company’s Global comparable sales growth fell for the fourth straight quarter to 1.9%.
The numbers come as McDonald’s and other fast-food chains raised their prices by mid- to high-single-digit percentages over the last year in response to the rising cost of ingredients.
However, as prices rise, consumers are becoming less likely to spend more, creating a difficult situation for the company where it once thrived.
“We have seen that our relative superiority on affordability has declined in some markets,” Kempczinski said, Reuters reported.
In the United States, McDonald’s first-quarter same-store sales grew 2.5%, far lower than last year’s growth of 12.6%. It was also slightly under what the company was estimating growth would be, 2.55%.
Looking at comparable sales for the company’s international licensees, McDonald’s saw a decline of 0.2% after analysts expected to see a rise of just under 1%.
While the numbers aren’t where the company would like them to be, they didn’t come unexpectedly.
“Clearly everybody’s fighting for fewer consumers or consumers that are certainly visiting less frequently, and we’ve got to make sure we’ve got that street-fighting mentality to win, irregardless of the context around us,” McDonald’s CFO Ian Borden said on the company’s conference call, CNBC reported.
But not every fast-food chain saw a decline or stagnant growth in the first quarter, as Wingstop saw sales increase 21.6% and Chipotle saw a rise of 5.4%.
However, Wingstop’s CEO Michael Skipworth told CNBC that consumers aren’t making their stops frequent, instead using their meals as a way to treat themselves.
“What we’ve seen with the consumer is, if they are feeling pressure, they have a tendency to pull back on more high-frequency [quick-service restaurant] occasions,” Skipworth told CNBC.