McDonald’s U.S. sales decline for first time in six quarters despite value push

McDonald’s reported a bigger-than-expected decline in U.S. sales as financially stretched consumers cut back on dining out, extending a slowdown that has tested the burger chain’s efforts to win back lower-income diners with value meals.

However, its shares rose 2.4 per cent in premarket trading as the company beat quarterly profit estimates thanks to a roughly 4-per-cent decline in operating costs and expenses.

Over the last two years, McDonald’s has rolled out a series of offers such as an under-US$3 menu and a US$4 breakfast meal as higher living costs force consumers to opt for cheaper alternatives from rivals, convenience stores and home-cooked meals.

Comparable sales in McDonald’s largest market fell 0.2 per cent in the quarter ended Sept. 30, missing analysts’ expectations for a 0.1 per cent fall, according to data compiled by LSEG. It was the company’s first such decline after five quarters of growth.

Customer traffic remained under pressure in the third quarter, and visits to McDonald’s restaurants fell 4.6 per cent in the three-month period from a year earlier, according to data firm Placer.ai.

Traffic also remained below year-ago levels in October despite the return of McDonald’s Monopoly promotion and Halloween-themed Boo Buckets.

CEO Chris Kempczinski said in a statement on Wednesday that the company was “encouraged by improvement as the quarter progressed following our intervention on value.” Chief financial officer Ian Border had told investors at a Sept. 23 event that US sales would likely be negative for the quarter, but that September would likely be positive.

Rival Burger King’s parent Restaurant Brands International topped sales expectations last week, helped by discounts and promotions. Yum Brands said on Tuesday Tex-Mex chain Taco Bell’s sales have returned to growth following a food safety-related hit.

McDonald’s global comparable sales rose 1.5 per cent, in line with expectations.

Adjusted earnings rose to US$3.57 per share from US$3.22 a year earlier, beating expectations of US$3.38.

McDonald’s announced its new turnaround strategy called “NEXT” in June. It includes simplifying operations, modernizing restaurant designs, and investing in employee training, and aims to improve restaurant-level efficiency by 250 basis points, generating about US$100,000 in additional annual cash flow for the average US restaurant.