McDonald’s global sales post surprise drop as tariff chaos hits consumer confidence

By Savyata Mishra

(Reuters) -McDonald’s posted a surprise decline in first-quarter global comparable sales on Thursday, as demand from cash-strapped diners in its key markets faltered on uncertainty sparked by chaotic tariffs.

The company is navigating the "toughest of market conditions", CEO Chris Kempczinski said, as global comparable sales fell 1%, while analysts on average had estimated a 0.95% rise.

The burger giant’s results echoed recent warnings from restaurant operators Domino’s Pizza (NYSE:DPZ), Chipotle Mexican Grill (NYSE:CMG) and Starbucks (NASDAQ:SBUX) that Americans were spending less on dining out.

"Less affluent consumers are most vulnerable to the impact of inflation and rising prices, and one of the first areas where they’ll cut back is dining out," EMarketer analyst Sky Canaves said.

McDonald’s (NYSE:MCD) shares were down about 1% in premarket trading. They have gained about 10% this year.

The tariff flip-flops by the Trump administration has worsened wallet pressures felt by lower-income customers in the U.S. and Europe, and disrupted businesses, threatening to push up costs and upend supply chains.

The U.S. economy is struggling, with latest data showing it contracted for the first time in three years in the first quarter, ramping up the chances of a recession in 2025.

McDonald’s has attempted to spur demand by ramping up its value menu offers such as the $5 meal deal and other limited time offerings on its burgers and fries, similar to its rivals.

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Still, comparable sales in the U.S., McDonald’s biggest market, slumped 3.6% in the first quarter, steeper than a 0.5% drop estimated by analysts, according to the data compiled by LSEG. It was the biggest drop since the pandemic in 2020.

However, its business segment where restaurants are operated by local partners, stood out with a 3.5% growth compared to last year, led by a sales recovery in the Middle East and Japan.

A demand hit in the Middle East showed signs of easing after last year’s widespread informal boycotts of Western fast-food chains over their perceived pro-Israel stance in the Gaza conflict.

Excluding items, McDonald’s earned $2.67 per share, a cent above estimates of $2.66.

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