Why they aren't 'McLovin' it' at the Golden Arches

Friday, 2 May 2025 03:37

McDonald's is feeling the impact of the economic turmoil being wrought by one of its best customers.

McDonald's sales dropped in the beginning of the year, marking the second consecutive quarter of declines as customers pull back their spending amid economic uncertainty.

In the US, its largest market, same-store sales dropped 3.6 per cent — the chain's worst drop since 2020 during the height of the COVID-19 pandemic when people were told to stay home.

Net income for the first quarter was $US1.87 billion ($2.93 billion), a decline from $US1.93 billion ($3.03 billion) compared to the same period a year ago. However, McDonald's notes that since last year had a Leap Day, or an extra day to make money, that slightly hurt its sales in 2025.

McDonald's CEO Chris Kempczinski said in a release that consumers are "grappling with uncertainty" but that he remains optimistic in the company's "ability to navigate even the toughest of market conditions and gain market share".

On a call with analysts, Kempczinski said "geopolitical tensions added to the economic uncertainty and dampened consumer sentiment more than we expected".

Visits to restaurants in its largest markets, including the US, fell more than predicted.

Although he expects McDonald's to "outperform" its competitors, the chain isn't "immune to the volatility in the industry or the pressures that our consumers are facing".

McDonald's is also seeing worsening pullback in spending from low-income consumers, which is down nearly double digits versus a year ago.

And, unlike a few months ago, spending from middle-income consumers also "fell nearly as much, a clear indication that the economic pressure on traffic has broadened".

The chain's blunt assessment of the economic environment mirrors that of other companies, with Chipotle, Yum! Brands, Domino's Pizza and Starbucks all recently reporting meager earnings results as consumer sentiment sinks.

The first quarter heralded the release of its revamped value menu, which was supposed to rev up sales for budget-conscious customers.

However, a new meal promotion with A Minecraft Movie (released by CNN's sister company Warner Bros. Pictures) was perhaps more successful in driving visits, with a third-party tracking service measuring measurable spikes to its restaurants.

Shares of McDonald's fell nearly 2 per cent in early trading.

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