McDonald’s Extends $5 Value Meal Till December: Retail Remains ‘Bearish’

McDonald's Corp (MCD) said on Thursday the much-favored $5 value meal will be sticking around with a majority of local markets extending it into December. The announcement comes at a time when restaurant chains are struggling with weak sales amid sluggish spending by low-income consumers.

Joe Erlinger, President of McDonald's USA said, “Together with our franchisees, we're committed to keeping our prices as affordable as possible, which is why we're doubling down with even more ways to save.”

The $5 meal includes a McDouble or McChicken sandwich, small fries, 4-piece chicken McNuggets and a small soft drink. McDonald's said franchisees across the U.S. are offering local deals both in-restaurant and on the McDonald's App.

Retail sentiment on Stocktwits, however, continued to trend in the ‘bearish’ territory (42/100) as investors appeared to digest the impact of the decision on the firm’s margins.

The decision to extend the value meal comes after McDonald’s had reportedly discussed the need to recapture consumers. According to a CNBC report in late July, Erlinger had said that McDonald’s struggled to sell diners on affordability and that he expects “industry and competitive challenges” to continue throughout the year.

“Reversing the narrative and re-establishing our position as the leader on value and affordability is possible, but it cannot be done overnight,” Erlinger wrote, according to the report. “It will happen through sustained and coordinated actions that show the customer we’re on their side.”

McDonald’s reported disappointing figures in its latest quarterly report. The firm reported earnings per share (EPS) at $2.97 versus an estimate of $3.07 while revenue came in at $6.49 billion compared to an estimate of $6.61 billion.

The company’s same-store sales fell 1%, missing an estimate for a growth of 0.4%. In the U.S., SSSG declined by 0.7%. McDonald’s had said comparable sales results were driven by negative comparable guest counts, partly offset by average check growth due to strategic menu price increases.

While discussions about potential rate cuts in September and an accelerated rate cut cycle are ongoing, the impact of rate easing is unlikely to reach consumers for a few quarters. Despite moderating inflation, recession fears are making low-income consumers more selective in their purchases. Not surprisingly, McDonald’s shares are down over 2% this year. 

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