McDonald’s Sales Surge Boosted by Value Meals and Grinch Socks

McDonald’s value meal strategy has driven significant sales growth, particularly in the U.S. For the fourth quarter, comparable sales at U.S. locations opened for at least a year increased by 6.8% compared to the previous year. Globally, same-store sales rose by 5.7% during the same period.

Successful Promotions and Customer Engagement

The fast-food giant launched several high-profile promotions last quarter. The return of the popular Monopoly game and a limited-time Grinch meal deal contributed to strong sales. The Grinch meal, which included themed socks, sold out quickly across various locations. This promotion made McDonald’s the largest global seller of socks for a brief period.

• Over 50 million pairs of socks sold globally during the campaign.

Addressing Consumer Trends

Despite these successes, the food industry has faced challenges. Many consumers, particularly those from lower-income backgrounds, have decreased their dining out frequency due to rising prices. Chris Kempczinski, McDonald’s CEO, noted the pressure on lower-income consumers while acknowledging that upper-income consumer traffic remained stable.

The value meal offers, such as the $5 Sausage, Egg, and Cheese McGriddle or the $8 10-piece Chicken McNuggets meal, have aimed to attract budget-conscious customers. In December, McDonald’s gained market share among lower-income consumers, indicating the effectiveness of their strategy.

Financial Considerations

Despite increasing sales, McDonald’s operates in a challenging financial environment. Ongoing high costs for labor and food require careful management. Last year, McDonald’s stated it would spend around $75 million in the fourth quarter to assist franchisees with their costs related to value meal promotions. Franchisees, owning approximately 93% of McDonald’s restaurants, bear the brunt of operational costs, including fees to McDonald’s.

Looking ahead, McDonald’s plans to withdraw support for the value meal deals by the end of the first quarter, while still providing targeted assistance for locations facing negative cash flow. CFO Ian Borden emphasized that franchisees should understand the need for temporary support, reinforcing that McDonald’s does not offer permanent subsidies.

Stock Performance and Future Outlook

In the past year, McDonald’s stock appreciated by 4.7%, reaching $324.91. This contrasts sharply with stocks of restaurant chains like Chipotle and Cava, which fell over 30% due to the lack of discounted meal offers.

Overall, global revenue for McDonald’s surged 10% to $7 billion, with net income up 7% to $2.2 billion. The core belief behind the value meal strategy is that customers attracted by discounts often purchase additional items, benefiting overall sales growth.