McDonald’s shares fell about 5% on Wednesday after the company warned that customer traffic in its key markets could remain flat as long as inflation stays elevated, despite announcing an $8.5 billion plan to support franchisees and a range of long-term growth initiatives.
Pressure on US sales
The warning heightened investor concerns that McDonald’s recovery could take longer than expected, as the company began implementing its “Next” strategy to reignite growth after several quarters of slowing sales and intensifying competition from companies focused on value offerings.
McDonald’s missed expectations for US sales growth in the second quarter last month, blaming execution errors that hampered efforts to win back lower-income consumers who had cut their spending on eating out.
Skye Anderson, who was recently appointed to lead McDonald’s US business, acknowledged the shortcomings on Wednesday, saying the company had not achieved the required level of consistency in execution and needed to improve restaurant operations.
The “Next” strategy and restaurant upgrades
McDonald’s “Next” strategy, announced in June, focuses on improving food quality, hospitality, value and innovation. Executives on Wednesday presented the first detailed roadmap for implementing the strategy.
The plan includes simplifying operations, updating restaurant designs, investing in employee training and expanding the use of Arch IQ, an artificial-intelligence-powered system for running restaurants and automating tasks such as taking drive-thru orders.
Protein-focused food options
Anderson said McDonald’s is adapting to changing consumer preferences, including demand from users of GLP-1 drugs for protein-rich options and greater flexibility in meal sizes.
She added that the company was considering introducing bowl meals, grilled chicken and egg bites to expand protein-focused options across breakfast, lunch and dinner.
eMarketer analyst Suzy Davidkhanian said consumers are making decisions based on factors beyond price, and that McDonald’s needs to give them reasons to visit its restaurants beyond simply offering a deal.
