Investors Grimace as McDonalds Cites Rare Profit Miss, Consumers Stray as Hamburgler Raises Prices

As consumer reports start rolling, inflation and higher pricing have already been two echoing themes. Today the golden arches fast food chain McDonald’s Corporation (MCD) announced Q1 financial results that missed on EPS $2.70 vs FactSet $2.72 and slightly beat on revenue $6.17B vs $6.16B. On the conference call, the company cited macro headwinds to be impactful and continuing into the second quarter. In some of its largest markets, McDonalds is experiencing flat to declining traffic which sets expectations that the company will end the second quarter below its historical +3-4% range. In addition to its budget-conscious consumers looking past its offerings, international sales were also impacted due to the Middle East conflict. The company intends to focus on affordability and value offerings to attract its cost-conscious consumers and will be testing a larger and more filling burger in a few markets later this year.

As we cited in our recent “Inside Look” article, “With a sector such as consumer, these earnings will provide how healthy the consumer is, where they are spending money vs where they have stopped as well as supply/demand impacts related to the group as a whole.” McDonald’s announcement today may be a telling message and indication of how healthy the consumer is. Cause for concern seems to be warranted as a global fast-food giant who caters to affordability and low budget consumers, is citing a decline in demand and pullback in consumer spending in addition to, missing on its quarterly profit estimates, a rarity for the company.