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McDonald’s is having a tough time in the inflation in economy.
The fast food chain reported weaker-than-expected second quarter earnings on Monday that highlighted price conscious consumers are still holding off on buying items from the burger giant. But even so, shares of McDonald’s slightly popped in early hours, trading at $252.
Despite the earnings and sales miss, which was the chain’s biggest drop in more than three years, shares have continued to rally.
“As consumers are more discriminating with their spend, we are focused on the outstanding execution of delivering reliable, everyday value and accelerating strategic growth drivers like chicken and loyalty,” said Chris Kempczinski, McDonald’s chief executive officer, in a statement.
With elevated food prices, especially fast casual dining options, inflation weary consumers are being more discerning with their disposable income. And recently, they appear to be spending a bit more cash on home goods, such as electronics and kitchen essentials.
In McDonald’s case, the chain has been trying to get consumers back with a $5 bundle. Notably, the deal launched at the end of June, which signals that its contribution to the most recent quarter may not be fully realized just yet. Some experts have said the deal is more “promotional,” than it is profitable. According to TV and streaming advertising firm iSpot, McDonald’s has spent about $8.4 million on promoting the bundle.
During the second quarter, sales in the U.S. and internationally declined. McDonald’s U.S. sales fell by 0.7%, in part due to less consumers paying the chain a visit, as well as higher prices, the company said in its earnings release.
A year ago, the chain reported that U.S. sales had grown by 10.3%, thanks to its Grimace Birthday Meal promotion. Meanwhile, international franchisee sales decreased by 1.1% during the most recent quarter, primarily due a decline from the chain’s France-based stores. McDonald’s also said that it was still impacted by the war in the middle East and waning demand from its Chinese market.
The Chicago-based McDonald’s missed Wall Street’s expectations. The chain reported revenue of $6.49 billion, about $2.97 earnings per share. The Street had forecasted it would generate $6.61 billion in revenue, roughly $3.07 earnings per share, according to FactSet.