Published by Global Banking and Finance Review
Posted on May 1, 2025
By Savyata Mishra
(Reuters) - McDonald's posted a surprise drop in first-quarter global comparable sales on Thursday, as demand from cash-strapped diners in the U.S. and Europe faltered on uncertainty sparked by chaotic tariffs.
The world's largest fast-food chain is navigating the "toughest of market conditions", CEO Chris Kempczinski said as restaurant visits by lower- and middle-income customers fell in double-digit range from last year.
The results echoed warnings from restaurant operators Domino's Pizza, Chipotle Mexican Grill and Starbucks that Americans were spending less to dine out as inflation and bleak economic outlook dent consumer confidence.
Tariff flip-flops by the Trump administration have worsened wallet pressures and disrupted businesses, threatening to push up costs and upend supply chains.
The U.S. economy is struggling, with latest data showing it contracted for the first time in three years in the first quarter, ramping up the chances of a recession in 2025.
"Less affluent consumers are most vulnerable to the impact of inflation, and one of the first areas where they'll cut back is dining out," EMarketer analyst Sky Canaves said.
McDonald's shares were down 2% in early trading after gaining about 10% this year.
The company has tried to spur demand by ramping up its value menu offers such as the $5 meal deal, similar to its rivals. Executives said McDonald's will offer the $5 meal throughout 2025.
Still, global comparable sales fell 1%, while analysts were expecting a 0.95% rise. In the U.S., McDonald's biggest market, it slumped 3.6%, steeper than a 0.5% drop estimated by analysts. It was the biggest drop since the pandemic in 2020.
However, its business segment where restaurants are operated by local partners, stood out with a 3.5% growth compared to last year, led by a sales recovery in the Middle East and Japan.
A demand hit in the Middle East showed signs of easing after last year's widespread informal boycotts of Western fast-food chains over their perceived pro-Israel stance in the Gaza conflict.
Excluding items, McDonald's earned $2.67 per share, a cent above estimates of $2.66, according to the data compiled by LSEG.
(Reporting by Savyata Mishra in Bengaluru; Editing by Arun Koyyur)
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