The fast food giant reported earnings Tuesday (Aug. 4) showing that while its global sales were up 4%, comparable sales in the U.S. climbed just 0.8%—compared to 2.5% during the same period last year—falling short of internal expectations.
“We don’t have a strategy problem,” CEO Chris Kempczinski said on an earnings call, telling investors, the company “simply didn’t execute at the level we needed to in the second quarter.”
Part of that lack of execution came with McDonald’s attempt to lure budget-conscious diners. To fund a new “10 items for under $3” menu, McDonald’s pulled back on popular digital deals, such as “buy one, add one for a dollar.”
“We estimate that these value execution factors accounted for about two-thirds of the customer traffic underperformance relative to our expectations for the quarter,” said Ian Borden, McDonald’s chief financial officer.
Digital offers are “something that’s valued by our most loyal customers. And so that ended up being a bad trade, putting in an app program that didn’t deliver and taking away a lot of digital offers and the buy one, add one program,” Kempczinski said, vowing that moving forward, “we will not get beaten on value.”
Another friction point could be found at the restaurant counter. Kempczinski illustrated the problem by describing a manager guiding staff through things like the launch of a new meal tied to the animated movie “KPop Demon Hunter,” and then pivot to a new $3 value menu, before rolling out a specialty beverage platform, and finally manage a World Cup-themed campaign.
This rapid-fire succession of “deployments” overwhelmed crews, leading to longer wait times and lower satisfaction scores, said Kempczinski.
“And I think if you also think about it from a customer standpoint, it’s tough to break through when you have that many messages out there,” the CEO said.
“You’ve got a KPop Demon Hunters message, then you have a value message, then you have a beverage message, then you have a FIFA message. You know, it’s tough to drive awareness when you’re sort of jumping around and giving those two or three, at most four, week windows.”
As part of a broader effort to “regain its swagger,” McDonald’s named Skye Anderson, its U.S. chief operating officer, to serve as the new president of its American operations, effective immediately. She replaces Joe Erlnger, who has held that role since 2019.
