McDonald's Sales Slump Amid Global Challenges

McDonald's reported a significant 1.5% decline in global sales for the third quarter, surpassing analysts' expectations. Traffic decreased across major markets as consumers opted for more affordable options amid economic strains. An E. coli outbreak also forced some U.S. restaurants to pause Quarter Pounders, impacting business further.

McDonald's has announced a more severe drop in quarterly global comparable sales than analysts anticipated, largely due to declining traffic across its principal markets, even amidst ongoing promotions to attract returning customers after extended price increases.

The company's global sales experienced a 1.5% decline in the third quarter, marking the most significant drop in four years, as cited by LSEG's data, surpassing the projected 0.72% fall. Consequently, McDonald's shares fell approximately 1% in pre-market trading.

The corporation has struggled with reduced customer visits across key areas including the U.S., Europe, and China, as price-sensitive consumers sought less expensive alternatives and cooked at home more frequently. This trend has influenced fast-food companies like Wendy's and Burger King to enhance meal bundles and special offers to regain customer interest, particularly among lower-income groups.

CEO Chris Kempczinski emphasized that McDonald's is concentrating on affordability due to customers' continued financial caution. Recently, the company temporarily halted Quarter Pounder sales in 20% of its 14,000 U.S. outlets, following an E. coli outbreak that adversely affected 75 people, resulting in one fatality. Slivered onions in hamburgers may be the infection source, with the Colorado Department of Agriculture dismissing beef patties as a potential cause. The firm's upcoming earnings conference call is expected to address the outbreak repercussions.

U.S. comparable sales increased by 0.3% during the quarter ending September 30, recovering from the previous quarter's decline, partially thanks to a $5 meal deal extended through December at numerous McDonald's venues. Nonetheless, international sales declined by 2.1%, largely attributed to weaknesses in countries like France and the UK. In addition, diminished consumer spending in China and the Middle East conflict have hindered McDonald's partnership-operated segment, causing a 3.5% sales drop compared to a 10.5% rise from the previous year. The Chicago-based firm's adjusted earnings amounted to $3.23 per share, up slightly from $3.19 last year.

(With inputs from agencies.)