(qlmbusinessnews.com Wed. 31st July, 2024) London, UK —
“Fast Food Giant McDonald's to Revamp Prices as Sales Fall”
McDonald's is set to reassess its pricing strategy following a dip in sales, as cost-conscious customers tighten their belts. Sales at established outlets fell by 1% between April and June compared to the previous year, marking the first decline since the pandemic began.
Despite offering discounts to lure back frugal customers and those boycotting the chain over the Israel-Gaza conflict, the fast food giant saw a decrease in revenue. CEO Chris Kempczinski stated that the disappointing results necessitate a “comprehensive rethink” of pricing.
Addressing investors, Kempczinski indicated the company would focus on discounts to curb the sales drop. Recent promotions, such as a $5 meal deal in the US and a UK campaign offering three items for £3, are expected to continue, with further “value” initiatives in the pipeline.
Shares in McDonald's climbed over 3% following the announcement. Kempczinski reassured investors of the firm's capability to implement the strategy effectively, citing McDonald's historical success with value deals.
The company has faced backlash over significant price hikes during the pandemic. Last month, the head of US operations responded to customer complaints, stating that social media had exaggerated the situation. He noted that the average price of a Big Mac, now $5.29 (£4.11), had risen by 21% since 2019, which aligns with inflation, and many items had increased by less.
However, Kempczinski acknowledged the need to restore McDonald's reputation for value. Price increases driven by inflation had led consumers to reconsider their purchasing habits, necessitating a thorough review in certain markets.
Analysts like Bank of America's Sara Senatore pointed out that McDonald's had increased prices on key items faster than its competitors, with savvy consumers taking note. While initiatives like the $5 meal deal are beginning to shift perceptions, a significant uptick in transactions is still needed.
McDonald's is not alone in facing slower consumer spending, with other corporate giants noting similar trends in major economies like China. The company's overall revenue, including sales from new stores, remained flat year-on-year, with profits dropping by 12%.
The loss of lower-income customers has not been offset by wealthier households trading down, the company reported. Declining demand in the US, coupled with weaknesses in France and price wars in China, further impacted sales.
France, where McDonald's has been subject to boycott calls due to the Israel-Gaza conflict, is one of several affected regions. Other US firms, including Starbucks, have also been targeted.
“Consumers are being more discerning about their dining choices, and we don't foresee significant changes in this trend over the next few quarters,” a McDonald's executive stated.
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