McDonald’s told investors it beat expectations in the first quarter, but it also warned that affordability pressures may intensify as drivers face higher fuel costs and consumers show heightened anxiety linked to the Iran war. Speaking Thursday during a conference call with investors, CEO Chris Kempczinski said the company has been working to bring lower-income customers back with value meals, even as he cautioned that gas prices and consumer sentiment could dent demand this spring.
The company’s outlook for the near term came after it reported global same-store sales growth for the January-March period, along with first-quarter financial results that surpassed what Wall Street expected. McDonald’s also pointed to softness after a strong comparison last April, when a popular Minecraft meal helped boost traffic. In its comments, the company said it was too early to read trends for May and June.
McDonald’s said global same-store sales rose 3.8% in the January-March period, which outpaced what analysts expected, according to reporting that cited FactSet’s forecast. The company then said same-store sales fell in the U.S. and some international markets in April. McDonald’s attributed that April weakness partly to the prior year’s surge, when sales were boosted by the Minecraft promotion.
Kempczinski linked the upcoming demand risk to the broader cost environment facing households. He cited a statement from AAA that the average price of a gallon of gas in the U.S. was $4.55 on Thursday—44% higher than a year earlier—and said elevated gas prices would weigh most heavily on lower-income customers. “Clearly, when you have elevated gas prices… that is going to disproportionately impact low-income consumers. And so we expect the pressures there are going to continue,” Kempczinski said on the investor call.
McDonald’s also said it is trying to control what it can through its menu strategy while consumer sentiment remains strained. It said it has been emphasizing value with limited-time items, including a U.S. menu launch of a beverage lineup that began this week, which the company said it hopes will generate interest. Kempczinski said consumer sentiment is heightened anxiety and may have an impact, while describing the company’s focus as “controlling what we can control.”
On the pricing front, the company described steps meant to keep entry-level options available. Starting April 21, McDonald’s U.S. stores began offering 10 items, each costing less than $3, as part of its push to emphasize value. Kempczinski said the company’s experience in markets such as Germany and Australia has shown that combining meal deals with lower-priced individual items provides the best value strategy for driving both interest and repeat visits.
McDonald’s said that strategy also reflects a demand reality for customers whose budgets are already stressed. Kempczinski said meal deals help drive excitement around core menu items, while entry-level price points give shoppers an option—described as “What can I get for $3 or less?”—when they are more stressed around affordability. In parallel, the company highlighted earlier U.S. price cuts that it made on some combo meals in September.
Financially, McDonald’s reported that revenue rose 9% in the first quarter to $6.52 billion, which it said was higher than Wall Street’s estimate of $6.47 billion, based on FactSet polling referenced in reporting. The company said net income rose 6% to $1.98 billion, and it reported adjusted earnings of $2.83 per share, compared with analyst forecasts of $2.74.
The results also came as McDonald’s used popular items to draw attention in recent months, including the Big Arch burger in the U.S., which it described as a viral sensation after Kempczinski posted a video taking a bite. The reporting also referenced comments from Tom Curtis, president of rival Burger King, who posted a video taking a larger bite of the chain’s new Whopper, underscoring how fast-food marketing is increasingly tied to social media and competition for traffic.
As McDonald’s works to balance value promotions with the cost pressures it warned about, it said shares were flat in early trading Thursday. The company’s comments to investors emphasized that while value drives results in the near term, the fuel-cost environment and anxiety tied to the Iran war could continue to affect visits by spring.