Key Takeaways
- American customers think McDonald’s lacks value when they see $10 combo meals on menu boards at the drive-thru, CEO Chris Kempczinski said Wednesday.
- The company is working with franchisees on adding more value to its “core menu” as traffic among low-income consumers continues to fall, Kempczinski said.
- McDonald’s second-quarter results exceeded analyst expectations, thanks to a strong performance from international restaurants.
The $2.99 Snack Wrap is merely an opening act. More value on McDonald’s (MCD) “core menu” is crucial for the chain to stage a comeback with low-income consumers, CEO Chris Kempczinski said Wednesday.
McDonald’s second-quarter domestic sales were lifted by promotions, including $5 meals, the Snack Wrap’s return and the option to add a number of items to an order for $1, Kempczinski said on its earnings call. The restaurant reversed a drop-off in traffic among middle-income households, but recorded a double-digit decline in visits from low-income Americans, he said.
That poses a problem for McDonald’s, which is working with franchisees to bring back customers who are put off by $10 combo meals at the drive-thru, Kempczinski said.
“We’ve got to get that fixed,” Kempczinski said, according to a transcript made available by AlphaSense, before concluding: “The single biggest driver of what shapes consumers’ overall perception of McDonald’s value is the menu board.”
The Chicago-based company surpassed quarterly revenue and earnings expectations, thanks to a strong performance abroad. Comparable store sales increased 3.8% year-over-year for the quarter ended June 30th, while analysts were expecting a 2.6% uptick, according to consensus estimates from Visible Alpha. Comparable store sales in the U.S. rose 2.5%, just above the 2.3% consensus estimate from Visible Alpha.
McDonald’s shares were up nearly 3% in recent trading. They have gained about 6% this year.
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