Improving international sales helped McDonald’s overcome some weakness at home in the fourth quarter, but the company said it expects U.S. Sales to pick up later this year.
McDonald’s said its sales are continuing to recover from an E. Coli outbreak last fall tied to its Quarter Pounder hamburgers. The Chicago burger giant said it’s also struggling to get low-income consumers back into its stores despite expanding discounts.
McDonald’s U.S. Same-store sales, or sales at locations open at least a year, fell 1.4% in the fourth quarter.
On a conference call with investors Monday, McDonald’s Chairman, President and CEO Chris Kempczinski said industry-wide fast food sales to low-income consumers were down double-digits in the U.S. In the October-December period.
“That’s the landscape that we’re looking to navigate through. It’s why it’s so important that we make sure that we have a strong value program,” Kempczinski said.
McDonald’s U.S. Sales slowed in the first half of 2024 as customers grew tired of price increases. The company responded in June with a $5 value meal that reignited traffic. The deal was so successful that the company extended it through next summer.
But then an E. Coli outbreak, which was first reported Oct. 22, sickened at least 104 people in 14 states, including 34 who were hospitalized, according to the U.S. Food and Drug Administration. One person in Colorado died.
The FDA closed its investigation into the outbreak in December, saying McDonald’s contained it once it stopped serving the raw onions the virus was linked to. But Kempczinski said the outbreak hurt sales of the Quarter Pounder, which is usually a big profit-generator.
Sales also remain weaker in the Rocky Mountain states where the outbreak was centered, Kempczinski said. McDonald’s doesn’t expect them to recover until the beginning of the second quarter.
McDonald’s said it is working to get customer traffic back up in the U.S. And will then layer in new products that will generate excitement and increased spending. The snack wrap, a menu item that has generated a lot of excitement, will return sometime this year, and McDonald’s is also planning a new chicken strip offering, Kempczinski said.
Kempczinski said the company is also learning a lot about demand for beverages like energy drinks from the beverage-focused CosMc’s chain it has been testing since early last year. Kempczinski said the company is trying to figure out how it can capture that demand within its existing restaurants.
International sales in McDonald’s company-operated markets edged upward slightly in the fourth quarter, with particularly strong sales in Germany and Italy. But Kempczinski said McDonald’s is also struggling to draw lower-income consumers in the U.K.
The bright spot for the fourth quarter was McDonald’s licensed markets overseas, where same-store sales climbed 4.1%. McDonald’s said it saw strong sales growth in the Middle East, where sales have struggled in recent years, and Japan.
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Overall, McDonald’s global same-store sales rose less than 1% for the fourth quarter. That was better than the 1.1% decline Wall Street had forecast, according to analysts polled by FactSet.
Fourth-quarter revenue fell slightly to $6.38 billion, just short of the $6.45 billion analysts were expecting.
The company’s fourth-quarter net income also fell, 1% to $2.01 billion. Adjusted for one-time items, McDonald’s earned $2.83 per share, which was lower than the $2.85 per share than Wall Street anticipated.
McDonald’s shares rose more than 4% in early trading Monday.
