McDonald’s reports stronger-than-expected first-quarter sales, but rising gas prices may hurt demand

(SeaPRwire) –   McDonald’s reported first-quarter sales that surpassed expectations, though the company warned that elevated gas prices and consumer concerns over the Iran war could negatively affect sales in the coming spring.

As of Thursday, AAA reported the average price of a gallon of gasoline in the U.S. at $4.55, marking a 44% increase compared to the previous year.

McDonald’s Chairman and CEO Chris Kempczinski stated the company has been making progress attracting lower-income customers back to its restaurants through value meals. However, visits from customers with household incomes of $45,000 or less continue to decline overall, a trend he said would not improve amid rising gas prices.

“Clearly, when you have elevated gas prices… that is going to disproportionately impact low-income consumers. And so we expect the pressures there are going to continue,” Kempczinski said during a conference call with investors on Thursday.

McDonald’s noted that same-store sales—sales at locations open for at least a year—declined in the U.S. and certain international markets during April. This drop was partly attributed to a significant surge in sales the previous April, which was driven by strong demand for a popular Minecraft-themed meal. Kempczinski said it was too early to assess sales performance in May and June, but the company hopes a newly launched beverage lineup in the U.S. will generate customer interest.

“Certainly consumer sentiment is heightened anxiety, let’s just say, and it may have an impact. But, you know, our focus is on controlling what we can control,” Kempczinski said.

Shares of McDonald’s remained unchanged in early trading on Thursday.

In the January–March period, McDonald’s global same-store sales increased by 3.8%, slightly outperforming Wall Street’s projected 3.7% gain, according to FactSet data from analysts surveyed.

The company maintained customer engagement through limited-time offerings such as the Big Arch burger—a high-calorie, 1,020-calorie item released in the U.S. in March. The burger quickly became a viral sensation after Kempczinski shared a video of himself taking a small bite, drawing criticism for his cautious approach. Tom Curtis, president of competitor Burger King, responded with his own video showcasing a hearty bite of the chain’s new Whopper.

In many U.S. markets, the Big Arch burger retails for well over $8. To counter this, McDonald’s has focused on promoting value elsewhere on the menu. Starting in September, the company reduced prices on several U.S. combo meals. Beginning April 21, all McDonald’s U.S. locations began offering ten menu items priced at under $3 each.

Kempczinski pointed to successful strategies in international markets like Germany and Australia, where combining meal deals with low-priced individual items proved most effective in delivering value to cost-conscious consumers.

“You need to have a meal deal offering there to be able to drive interest and excitement around some of our core menu items,” Kempczinski explained. “But you also need entry-level price points for those folks who are maybe a little bit more stressed around affordability and are looking for, you know, ‘What can I get for $3 or less?’”

The Chicago-based chain announced its revenue grew 9% in the first quarter, reaching $6.52 billion—above the Wall Street expectation of $6.47 billion, per FactSet.

Net income rose 6% to $1.98 billion. After adjusting for one-time items, the company earned $2.83 per share, surpassing analysts’ forecast of $2.74.