The inflation crisis that has been slamming the U.S. economy now has caused significant losses to consumers. Last month, data showed consumer confidence in the United States fell to a five-year low. Since 2022, the country's economy shrank in the first quarter.
The current revenue season emphasizes the struggles of companies exposed to consumer spending. Fast food restaurant McDonald's (NYSE:MCD) missed Wall Street estimates for the March quarter, while its U.S. peer sales fell 3.6%, the biggest drop since 2020.
Don't miss:
McDonald's CEO Chris Kempczinski Frankly pointing out the dilemma of affecting the company's consumers during earnings calls with analysts. The fast-service restaurant industry for low-income consumers fell by double digits compared to last quarter, the executive said. According to Kempczinski, middle-income consumers have been in good shape and until a few months ago they saw a similar decline, suggesting that economic pressure on transportation has "expanded".
But, as the average American's wallet feels squeezed, the fast food expenses of wealthy customers are still flexible.
"Transportation growth for high-income people remains solid, which illustrates the split in the U.S. economy, especially low- and middle-income consumers, are being affected by the cumulative inflation and exacerbating anxiety about the economic outlook," Kempczinski said.
trend: Do you have money? This is something Americans think you need to be considered rich.
McDonald's believes consumers' weaknesses despite launching a new $5-value meal at its U.S. restaurant earlier this year to attract customers. Kempczinski said in its latest earnings call that the company knows affordability and value are "most important" in the current environment and has launched cheap meals in five major international markets.
Consumers’ economic struggle is not limited to U.S. Kempczinski said on the phone that the company saw a "similar story" in the international market, with comparable sales down 1% compared to last year. Of the five major markets, only two are positive.
See: If you are 35, 50 or 60: This is how much you should save vs. Invest now
McDonald's total revenue fell 3% year-on-year in the first quarter. The company also saw comparable sales in the UK, while sales in the Middle East and Japan also made profits.
“We will remain agile to ensure McValue continues to meet consumer needs and succeed in challenging markets,” Kempczinski added. “For the remainder of 2025, given the current $5 deals resonate with customers, especially customers, we will continue to include daily value deals.”
McDonald's competitors are also starting to see the impact of contraction in consumer spending. good! Brands (NYSE:YUM), owner of Pizza Hut, Taco Bell and KFC, recently missed Q1 revenue expectations as same-store sales in Pizza Hut fell by 5% in the same-store sales in the U.S.
Read the next article:
Image: shutterstock
Next: Change your deals with Benzinga Edge's unique market trade ideas and tools. Click now to access unique insights This can give you the lead in today's competitive market.
Get the latest stock analysis from Benzinga?
The article "Split Economy": McDonald's CEO says Rich continues to eat, but consumers with average income initially experience economic "anxiety" on Benzinga.com.
©2025 benzinga.com. Benzinga does not provide investment advice. all rights reserved.