America is not getting relief from its K-shaped economy problem anytime soon, McDonald’s CEO Chris Kempczinski said.
Loading audio narration…
In a Thursday earnings call, Kempczinski said that the macro environment and consumer sentiment are “certainly not improving, and it may be getting a little bit worse.”
The K-shaped economy, which refers to a divide in spending patterns between higher and lower-income consumers, has been a hot topic in retail earnings in recent months.
Kempczinski said the affluent continue to have “very resilient spending.”
“And that is true for our business as well, where we’re seeing solid growth, good growth with higher income, and also gaining share with higher income for us,” he said.
But the picture is different on the other side of the aisle. He said that while the reduction in spending from lower-income consumers is not as pronounced as it was six months to a year ago, spending is “absolutely still declining.”
He said inflationary pressures and rising gas prices are disproportionately affecting low-income consumers, and that consumer sentiment is marked by “heightened anxiety.”
McDonald’s is trying to cater to both prongs of the K-shaped economy. It has doubled down on its lower-priced McValue menu, expanding to $3 menu items and $4 breakfast meal deals, alongside the $5 meal deal it introduced last year.
But has also introduced some premium products, such as new drinks like “Dirty Dr Pepper” and “Mango Pineapple Refresher,” which cost around $5 in New York City. Its new Big Arch burger — the one that went viral after Kempczinski’s taste test in February — costs more than $12 in NYC.
The fast food chain announced a 3.8% increase in global same-store sales in its latest quarter. Its total revenue was $6.52 billion. Its stock price is down about 7% since the start of the year.
