McDonald's: Recession Impacts Profit Figures – Slowed Recovery in Sight?

That McDonald's missed revenue and profit expectations in the second quarter is likely still fresh in investors' minds. Despite an attempt to boost sales with $5 menu offers, the company continues to face the same challenges. It appears that these difficulties persist into the current quarter. A look at the recent decision to extend the $5 menu deals until December highlights the ongoing problems. Originally introduced in June, these special offers were only intended to last for one month. Due to positive feedback from price-conscious customers – often from low-income households – the promotion is now being continued. However, this could impact quarterly results again. It is no secret that many consumers are currently experiencing financial difficulties. Both McDonald's and industry peers like PepsiCo and Procter & Gamble have made similar observations. Even Dollar General feels the effects of this economic situation. Companies are responding to rising prices with attractive offers. While an average meal at McDonald's now costs around $10, the chain offers a selection of affordable combo meals for $5. This strategy is not without controversy, as many franchisees doubt the financial sustainability of such offers and require additional support from McDonald's. However, the concept is showing results. Without providing exact figures, management emphasized strong demand during the last quarterly conference. The decision to continue the special offers despite financial losses demonstrates the core customer base's ongoing reluctance to increase their spending. This scenario is likely to characterize the current quarter as well. Analysts share this assessment. While a slight increase in revenue for the third quarter compared to the previous year is expected, forecasts remain cautious. Earnings are projected to rise marginally from $3.17 to $3.19 per share. This corresponds to a conservative stance that could be further revised downward if price relief does not occur. The outlook for the fourth quarter is also not promising. CFO Ian Borden predicted during the July conference that customers will continue to suffer from the economic situation and high living costs – a statement he emphasized multiple times. Immediately after the decision to extend the $5 offers, the markets responded positively, and the stock saw a short-term increase. The management sees an opportunity in the current climate to gain market share. But when looking at the overall picture, the challenging economic environment remains. Another disappointment in the quarterly results is therefore not unlikely. For cautious investors, the recent price increase could present an opportunity to avoid risks.