McDonald’s prices rise, so low-income consumers are increasingly eating at home

(CNN) — Some low-income Americans are avoiding McDonald’s and choosing to cook at home instead, the fast-food chain’s chief financial officer (CFO) said at an investor conference on Wednesday.

“It’s a challenging consumer environment,” said Ian Borden, McDonald’s chief financial officer, noting that many consumers are trying to compensate for inflation, higher interest rates and their dwindling savings.

Inflation has led Americans to cut back on small luxuries. This includes their spending at places like McDonald’s, fast-food restaurants that have historically prioritized price and affordability as core business values.

But now, eating out has become a luxury. According to February inflation data from the Consumer Price Index, household food prices rose 1% year over year, while restaurant prices rose 4.5% from a year earlier.

However, the current increase in restaurant prices has changed that compared to a year ago, when eating out was cheaper. During that time, restaurant prices had increased 8.4%, while market grocery prices had increased 10.2% year over year.

“Some of those consumers are choosing to eat at home more often,” Borden said.

To win back these customers, Bourdain said McDonald’s is offering them more money at the drive-thru, including packages priced at $4 or less at 90% of its U.S. locations.

“We want to make sure the consumer knows what’s available and obviously thinks of us when they choose,” Borden said.

McDonald’s has also faced financial problems internationally. For example, the fast food chain has noted that the turmoil in the Middle East has affected sales in the region.

Sales at its authorized market business, which includes most of its Middle East locations, grew just 0.7% in the latest quarter, worse than more than 4% growth in the United States and elsewhere. International trade.

Whether a customer is buying groceries to eat at home or to eat out, prices have improved since the beginning of the pandemic. Overall food price inflation is rising at the slowest pace since May 2021, according to CPI data. Price increases at grocery stores are at the lowest level since June 2021, while food inflation at restaurants saw the smallest increase since July 2021.

Consumers have also cut back on spending at discount chain Family Dollar, whose parent company said Wednesday it would close about 1,000 stores. Company executives said decades of high inflation have driven away customers, hurting its profits and increasing its competition with Dollar General and Walmart. Family Dollar also suffered from years of mismanagement and poor store conditions.

McDonald’s shares fell nearly 3% in afternoon trading.

CNN’s Alicia Wallace and Jordan Walinsky contributed to this report.

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