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McDonald’s reported better than expected sales growth after cash-strapped consumers seized on its value meals.
Chief executive Chris Kempczinski told analysts on Wednesday that the chain’s renewed focus on deals allowed it to “gain share with low-income” diners.
Sales at McDonald’s restaurants that have been open at least a year rose 5.7 per cent between October and December compared with a year before, the hamburger chain reported on Wednesday. That is more than the 5.1 per cent growth that Wall Street analysts surveyed by Bloomberg had been expecting. Shares of the Chicago-based burger chain fell 0.3 per cent in after-hours trading.
Affordability has emerged as a top concern for US consumers as economic uncertainty limits household budgets and presses the revenue of companies that sell families food and household goods.
Kempczinski last year warned McDonald’s increased traffic and sales came after low-income consumers reduced their visits to fast-food restaurants as inflation persisted and wage growth slowed.
The overall restaurant industry has had five months of slowing growth, according to market research firm Black Box Intelligence. Consumer sentiment plunged to its lowest level in more than a decade in January.
“McDonald’s value leadership is working,” Kempczinski said. “By listening to customers and taking action, we have improved traffic and strengthened our value and affordability scores.”
The chain used promotions to lure back cost-conscious diners. McDonald’s established itself as a leader in the fast-food sector’s so-called “value wars” by expanding its customer loyalty programme, reintroducing its Monopoly game in October, adding a holiday meal branded with the Dr Seuss character The Grinch and expanding the marketing of its extra-value deals.
Some other limited-service restaurants have not fared as well. Earlier this month, Chipotle reported its comparable sales declined last year for the first time since it went public in 2006. Yum Brands last week said it would close hundreds of underperforming Pizza Hut locations.
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