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McDonald's Corp. (NYSE:MCD) is kicking off 2025 with a warning about a growing divide among U.S. consumers, noting a clear split along income lines.
What Happened: During its first quarter earnings call on Thursday, McDonald’s CEO, Chris Kempczinski’s opening remarks centered around the declining foot traffic in the quick-service restaurant industry, especially from the low and middle income consumer cohort, both of which are down nearly 10% compared to the prior year quarter.
However, traffic among high-income consumers remains strong, which Kempczinski said “illustrates the divided U.S. economy, where low- and middle-income consumers in particular are being weighed down,” by factors such as inflation and a bleak economic outlook.
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During the Q&A session, CFO Ian Borden noted that McDonald's customer base skews toward low- and middle-income consumers, prompting the company to double down on its commitment to “strong value” and “affordability” across its menu offerings.
Borden adds that this value-focused strategy helped McDonald's outperform its closest competitors on same-store guest counts during the first quarter.
Why It Matters: The company experienced a 3.6% year-over-year decline in same-store sales during the quarter, which marks its steepest decline since 2020, during the COVID-19 pandemic. As a result, McDonald’s missed consensus estimates, with $2.67 in earnings per share, from $5.96 billion in revenue.
This coincides with the Consumer Sentiment Index crashing to a three-year low in April, at 50.4, down from 57 in March, with tariffs, inflation expectations, and market reactions taking their toll.
Amazon.com Inc. (NASDAQ:AMZN) CEO Andy Jassy expressed similar concerns during the company's first-quarter earnings call on Thursday, pointing to shifts in consumer behavior reminiscent of the pandemic. “There's maybe never been a more important time in recent memory than now to try to keep prices low,” he said.
Photo Courtesy: New Africa On Shutterstock.com
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