McDonalds Prices Are Up, So Lower-Income Consumers Are Eating At Home

Some lower-income Americans are turning away from McDonalds in favour of cooking at home, according to the fast food chain’s chief financial officer, who spoke at an investor conference Wednesday.

“It’s a challenging consumer environment,” said Ian Borden, McDonald’s CFO, stressing that many people are struggling with inflation, rising interest rates, and shrinking savings.

McDonalds Prices Are Up, So Lower-Income Consumers Are Eating At Home

The sting of inflation has prompted Americans to cut back on little luxuries. This includes spending on food at fast-food restaurants like McDonald’s, which traditionally valued value and affordability as major company objectives.

Dining out has become a luxury. According to February inflation figures from the Consumer Price Index, food prices at home rose 1% yearly, while restaurant prices rose 4.5%.

However, the current rise in restaurant pricing has reversed the trend from a year ago, when it was cheaper to dine out. At the time, restaurant costs were up 8.4%, while supermarket prices were up 10.2% year on year.

“Some of those consumers are just choosing to eat at home more often,” said Borden.

To reclaim these customers, Borden stated that McDonalds provides more bang for their money in the drive-thru, including packages priced at $4 or less at 90% of its US outlets.

“We want to make sure the consumer knows what’s available and obviously is thinking of us when they’re making their choices,” said Borden.

McDonalds has also struggled financially on a global scale. For example, the fast-food company has stated that the Middle East’s unrest has impacted regional sales.

McDonalds Prices Are Up, So Lower-Income Consumers Are Eating At Home

Sales in its licensed markets division, which includes most of its Middle Eastern locations, increased by only 0.7% in the fourth quarter, significantly below the growth of more than 4% in the United States and other foreign companies.

Whether a client is shopping for groceries or eating out, prices appear lower than they have been in years since the pandemic began. According to CPI data, food inflation is rising at the slowest rate since May 2021. Grocery store price increases have reached their lowest point since June 2021, while food inflation in restaurants has increased by the least amount since July 2021.

McDonalds Prices Are Up, So Lower-Income Consumers Are Eating At Home

Consumers have also reduced their spending at bargain brand Family Dollar, whose parent firm announced Wednesday that it will close roughly 1,000 locations. According to company leaders, decades of rising inflation have driven customers away, reducing profits and aggravating competition with Dollar General and Walmart. Family Dollar also dealt with years of mismanagement and bad store conditions.

McDonalds stock was down about 3% in afternoon trading.

SOURCE – (CNN)