McDonald’s has a warning about the economy

McDonald’s stock price declined more than 1% on Thursday on disappointing first-quarter results, as broad economic pressures weighed on customers and kept them away.

Same store sales slip and revenue declines

The iconic chain’s U.S. same-store sales dropped 3.6% — a rare miss uncomfortably recalling a similar drop during the 2020 pandemic. Global comparable sales slipped 1%. Total revenue declined 3% to $5.96 billion, while earnings dipped 2% to $2.60 per share.

“Consumers today are grappling with uncertainty,” said CEO Chris Kempczinski in the earnings release, calling out macro pressures as guest counts underwhelmed – i.e., as customers skipped their Big Macs and fries. Management was careful to note that the absence of Leap Day distorted year-over-year comparisons, because when you’re the size of McDonald’s, even one fewer sales day per year makes a difference. But the broader story was one of anxious consumers.

International results were uneven. Japan and the Middle East helped McDonald’s licensed markets grow 3.5%, but U.K. consumers seemed particularly cautious, dragging down company-operated regions.

Bright spot: App proves popular to the tune of $8 billion

It wasn’t all bad news, however. One bright spot was McDonald’s digital loyalty program, which drove $8 billion in systemwide sales this quarter and more than $31 billion over the past year — proof that customer engagement remains strong, even as wallets tighten.

Those app-based deals for $1.29 any-size fries and 20% off orders over $12 are simply hard to ignore, and become all the more compelling as wallets tighten.

Earnings paint portrait of diverging fortunes

McDonald’s joins a growing list of consumer-facing brands flashing warning signs. Harley-Davidson (HOG) yanked its full-year guidance Thursday, citing tariff fears. Starbucks (SBUX) saw shrinking margins and slowing traffic. Sysco (SYY), the largest restaurant supplier in the U.S. and UK, also missed, suggesting a burgeoning restaurant recession cutting across both the higher and lower ends of the markets. Consumer confidence just saw its sharpest drop in years.

Meanwhile on Thursday, Wall Street – a part of it, anyway — is roaring. Big Tech earnings from Microsoft (MSFT) and Meta (META) have powered the Nasdaq higher, with Microsoft up 9% and Meta gaining over 6%. As investors chase AI growth and bet on hyper-scaling, the disconnect between Wall Street and Main Street looks to be growing starker. And for companies relying on middle- and lower-income, discretionary spending, the squeeze is here — and it’s showing up in the numbers.