McDonald’s in the US had a drop in sales to lower-earning customers while it attracts wealthier ones

People under economic pressure are forgoing dining out and impulse purchases. Photo / 123rf

Lower-income United States customers aren’t finding much value in the menu at McDonald’s these days.

Traffic dropped “nearly double digits” industry-wide among this demographic, chief executive Christopher Kempczinski told investors yesterday during the fast-food giant’s third-quarter earnings call.

Such customers are disproportionately feeling the strain of mounting economic pressures, including higher prices on groceries and clothing as well as the growing cost of rent and childcare, he said.

“There’s some significant inflation there that the low-income consumer is having to absorb, and I think that’s affecting their outlook and their sentiment and their spending behaviour,” Kempczinski said.

Traffic among higher-income customers continues to grow across the fast-food sector, increasing “nearly double digits” in the quarter, he said.

McDonald’s said its US same-store sales grew 2.4% year over year, a slight decline from the last quarter’s 2.5%, and increased 3.6% globally. Overall sales hit US$36 billion, up 8% from last year.

McDonald’s is the latest example of a growing bifurcation among US consumers.

The wealthiest Americans are fuelling consumer spending, while the working class - bogged down by waning wage growth, grocery inflation and the rising costs of living - are forgoing dining out and impulse purchases, according to economists and industry experts.

Chipotle chief executive Scott Boatwright told investors last week that “the gap has widened” among its customers, with those in households earning less than US$100,000 - which represents about 40% of the chain’s total sales - eating at the fast-food restaurant less frequently.

Walmart, Dollar General and Dollar Tree have also noted the growing pressure on their core low-income customers as they continue to pull back on spending in discretionary categories - while picking up shares among wealthier consumers looking for bargains.

McDonald’s has struggled to hold on to lower-earning customers in recent quarters since raising prices.

The first quarter this year marked its most dramatic year-over-year drop in revenue since the height of the pandemic. Visits from low- and middle-income customers during that period dropped 10%.

From 2019 to 2024, the average cost of a menu item rose 40%, according to a company fact sheet. The Chicago-based company argues this is in line with its overall cost increases, including higher wages and pricier food and paper goods.

The company is trying to balance the risk of passing on higher prices to customers without losing lower-income consumers, Kempczinski noted.

“There’s no easy answer to it,” he said. “I think everybody in the industry is trying to figure that out.”

The fast-food chain, along with its peers, is facing tougher competition from sit-down restaurants such as Chili’s, which have drawn in price-conscious consumers who see better value for meals.

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