McDonald’s sales growth came in slower than expected when the company released its second quarter earnings on Tuesday, with leaders pointing to execution lapses they say hampered its push to promote value deals aimed at lower-income consumers.
CEO Chris Kempczinski said that weak promotion of value deals and a pullback in the use of digital deals, such as its buy-one-add-one promos, led to a drop in visits from loyal customers – noting that accounted for about two-thirds of the shortfall in customer traffic for the quarter.
Comparable sales for McDonald’s largest market grew 0.8%, below analysts’ estimates of a 1.06% increase, according to data compiled by LSEG. The pace of the fast-food giant’s U.S. growth was 2.5% last year.
“We don’t have a strategy problem. We simply didn’t execute at the level we needed to in the second quarter,” Kempczinski said.
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The CEO said that while McDonald’s has “restored our overall value and affordability leadership, our restaurant level results show that execution was inconsistent across the system,” noting that the best performing restaurants executed the affordable price menu plan and saying they “need the same level of execution in all our restaurants.”
He went on to say that about one-thirds of the McDonald’s system’s restaurants didn’t execute against the guidance for the every day affordable price menu, adding that the company will educate franchisees about the importance of complying with that pricing scheme which will factor into business reviews.
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Kempczinski also said that restaurant teams were overwhelmed by the number of deployments McDonald’s put forward in the quarter, which impacted efficiency and worsened customer service times, while marketing programs didn’t deliver against expectations.
McDonald’s CFO Ian Borden said that in the near term, the company is launching more national digital flash offers starting next week to “reenergize our high-frequency customers,” while also targeting the chain’s most loyal customers with more personalized digital offerings.
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| MCD | MCDONALD’S CORP. | 268.38 | +3.12 | +1.17% |
Borden added that the company is already taking steps to simplify restaurant operations by eliminating several non-customer-facing activities over the remainder of the year.
As part of the company’s push to reinvigorate its growth, McDonald’s named Skye Anderson to lead its U.S. business, betting on an executive with extensive experience across operations and international markets.
Anderson has worked for the company for 26 years, which includes time as the U.S. chief operating officer. In her new role she will oversee about 14,000 restaurants in the U.S. and guide McDonald’s new turnaround strategy.
Reuters contributed to this report.
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