Life under the Golden Arches hasn’t been easy this year.
McDonald’s has dealt with a customer revolt over expensive Big Macs, an unsolicited cameo in the crossfire of the election season and now an E. coli outbreak — just as the company lured customers back with cheaper burgers.
Still, Mickey D’s, like American consumers themselves, remains in solid shape heading into 2025 despite the ongoing challenges.
The fast-food giant reported Tuesday that it had reversed its recent decline in U.S. sales, posting a 0.3% increase in the third quarter. Foot traffic was still down slightly, but the company said its summer of discounts paid off.
“We remain laser-focused on delivering an unmatched experience with simple, everyday value and affordability that our consumers can count on as they remain mindful of their spending,” CEO Chris Kempczinski said in a statement alongside the earnings report.
The financial results come near the end of a subdued year for the nearly $213 billion restaurant chain, whose shares were flat following its latest earnings report. Kempczinski sought to reassure investors that the E. coli outbreak linked to Quarter Pounder burgers was under control after the health crisis temporarily dented the company’s stock and caused U.S. foot traffic to fall nearly 10% in the days that followed, according to estimates from financial researchers Gordon Haskett.
“We see it as behind us,” Kempczinski said during Tuesday’s earnings call.
Despite a tough quarter, McDonald’s appears resilient in the face of pressures, analysts say — something the company shares with U.S. consumers generally.
Compared with other big brands like Starbucks that have struggled to reconnect with wallet-conscious customers, McDonald’s has done a “great job” of bringing diners back, said Ravi Dhar, director of Yale University’s Center for Customer Insights.
“McDonald’s has also done a good job of embedding its brand in popular culture to increase its relevance and meaning around fun and family. But it has also had to adapt its product line to meet the expectations of a budget-conscious consumer,” he said.
McDonald’s did not respond to requests for comment.
For many consumers, the fast-food giant’s menus serve as an informal barometer of the broader economy, said Sara Senatore, a Bank of America analyst who covers restaurants. “The spotlight is always on McDonald’s because it’s so big” and a “indicator of sorts,” she said.
That may be one reason it has cropped up in the presidential race. Vice President Kamala Harris has touted the summer job she once had at the burger chain to bolster her middle-class credentials. That prompted former President Donald Trump to serve fries at a Philadelphia-area McDonald’s during a photo op this month.
Mickey D’s $5 meal deal, launched in late June to boost flagging sales, has given the company an attractive price point to advertise nationwide, Senatore said, speculating that it could open the door to a new permanent value proposition. But before that promotion rolled out, the company’s reputation as a cheap option had taken a hit.
Like many big brands, McDonald’s reaped big profits as the economy reopened after the pandemic. In October 2022, executives boasted that they had raised prices without limiting traffic, even as competitors began warning that some customers were closing their wallets after inflation spiked above 9% that summer. Still, the U.S. had repeatedly dodged a much-predicted recession, and Americans continued to spend on nonessentials like travel and dining out — despite regularly telling pollsters their bleak outlook on an otherwise solid economy.
But earlier this year, photos of eye-watering menu prices at some McDonald’s locations — including an $18 Big Mac combo at a Connecticut rest stop in July 2023 — went viral, bringing long-simmering customer frustrations to a boiling point the company couldn’t ignore. During an earnings call in April, Kempczinski acknowledged that foot traffic had dropped.
“Consumers continue to be more selective with every dollar they spend,” he said at the time. In the future, McDonald’s would be “laser-focused” on affordability.
Mickey D’s wasted no time in extending its $5 meal deal, with Coca-Cola throwing in some marketing money, after it performed better than expected.
“What McDonald’s has struggled with, and why I think we’re seeing some kind of a tipping point, is a value proposition,” Senatore said. “McDonald’s menu price increases have been ahead of many of its restaurant peers. … Consumers are smart enough to know that.”
The company is far from alone in a course correction, said Sam Oches, managing editor of the restaurant and food group at Informa, a market research firm. “Everyone has been trying to find solutions to the downward trend in traffic all year,” he said.
Finding the right formula isn’t easy, Oches said, because it requires adapting to shifts in consumer behavior that are still in flux: “Someone might say, ‘No more McDonald’s drinks today, I’m going to eat at home — but maybe I’ll get one tomorrow.’ But even a few fewer visits, across millions of people, has a big impact.” Senatore attributed McDonald’s ability to address the problem in part to its sheer size, with more than 14,000 locations in the U.S. alone. “I can’t stress enough how important relative scale is in this industry,” she said. “They just have a much bigger megaphone.”
Other big megaphone-welding companies have joined the price-cutting bandwagon this year, fearful of their own customers walking away or to address the ongoing decline. Amazon, Walmart, Target, Best Buy, Walgreens and JetBlue are just a handful of major consumer brands that have leaned on discounts this year. That reality still applies as consumers adjust to higher prices even as inflationary fever has subsided, with the pace of price increases slowing last month to its lowest level since February 2021.
Still, 64% of consumers said they noticed price increases at fast-food restaurants in September, more than at any other type of location, according to a survey by Datassential, a food and beverage market research firm. Politicians are also continuing to focus on the cost of fast food as the election season heads toward a tumultuous end. A group of Democratic senators criticized McDonald’s this month for menu prices that they said outpaced inflation, accusing the company of seeking to make a profit “at the expense of people’s ability to put food on the table.”
In such an environment, analysts expect the discounts and promotions to continue. “In a normalized environment, I don’t think you would see as much emphasis on value as we’re seeing now,” said Jim Salera, a restaurant industry analyst for the financial firm Stephens.
And so far, the play is largely working. Retail sales rose 0.4% last month, better than expected.
“The September numbers show that consumers are willing to spend where they see value,” Jack Kleinhenz, chief economist for the National Retail Federation, said in a statement. “It’s clear that consumers continue to drive the economy, and conditions for the retail industry remain favorable as we head into the holiday season.”
For McDonald’s, even the E. coli outbreak, which has sickened 75 people in 13 states and killed one, hasn’t shaken Wall Street’s confidence in the company. The stock has been “fairly volatile,” Senatore acknowledged, but has remained about flat since the beginning of the year. JPMorgan analysts recently said the company’s stock is “now trading on emotion/concern,” and pointed to McDonald’s robust, flexible supply chain and strong momentum behind the $5 meal.
Whether those expectations play out in the fourth quarter and next year remains to be seen. But for now, the company is holding its ground.
“They’re constantly fighting for attention, loyalty, trust, working on menu innovations, rolling out loyalty programs,” Oches said. “It’s a battle out there.”