McDonald’s third-quarter sales growth slows amid tough consumer sentiment and new drinks push

McDonald’s (MCD) sales growth slowed in the third quarter as consumers faced tough economic conditions and the fast-food chain unveiled its growth strategy.

The results showed that same-store sales rose 1.5% year over year, slightly more than the 1.4% growth Wall Street expected, according to Bloomberg estimates. In the third quarter of last year, McDonald’s reported same-store sales growth of 3.6%.

In the United States, the company reported a 0.2% decline in comparable sales, slightly lower than the expected 0.5% decline. Data from Placer.ai shows visits to the Golden Arches were down compared to last year, but the company said customers were spending more when they went.

The October promotions gave rise to a certain vigor as the end-of-year holidays approached. CEO Chris Kempczinski said the company was “encouraged by the improvement as the quarter progressed following our value intervention.”

Revenue came in at nearly $7.2 billion, below expectations of $7.4 billion, along with adjusted earnings of $3.57 per share, above expectations of $3.40 per share.

Ahead of the results, BTIG analyst Peter Saleh said “challenges related to weak revenue, disappointing promotions and overly busy marketing calendars” were the main concerns for franchise operators during the quarter.

“Drinks were cited as a rare positive,” he added, referring to an energy drink McDonald’s launched with Red Bull in September.

The company is also looking into holiday deals starting November 3. McDonald’s has revealed a limited-time lineup featuring a cookie butter coffee or latte, a cranberry-infused Sprite drink and a cranberry-flavored Red Bull energy drink.

Citi’s Jon Tower shared a similar message in a note, writing: “We still have confidence in beverages as a broader platform, (and) another entry-level value attempt should happen in early ’27.”

The company named Skye Anderson, a 26-year McDonald’s veteran, as president of McDonald’s USA last quarter. Anderson is working on a new value menu for 2027 after franchisees and consumers failed to fully engage with the company’s sub-$3 offerings.

Anderson will play a key role in a new growth strategy as McDonald’s makes a long-term bet on artificial intelligence, hand-breaded chicken and the return of ’90s-style restaurant design to win back customers who left for other chains, like Burger King (QSR).

McDonald’s announced plans to invest $8.5 billion by 2036 to support restaurant technology updates with rent and capital relief. It intends to complete approximately $5 billion of this investment by 2030.

According to Saleh, franchisee reactions to NEXT’s growth strategy have been mixed.

“Franchisees (are) very skeptical about the possibility of any level of margin gain, are not convinced that an extensive renovation program is necessary and note that very few details on costs and co-investment have been shared,” Saleh wrote. “Without a significant reduction in construction costs and more field testing, we do not believe the NEXT project can be realized.”

McDonald’s operators are expected to update the appearance of restaurants as part of a 10-year renovation cycle, according to McDonald’s, and Kempczinski said those costs typically run $400,000 to $450,000 per restaurant.

Rolling out McDonald’s suite of productivity improvements will cost franchise operators an additional $800,000 per U.S. restaurant. For international markets, it will cost operators between $650,000 and $750,000.

Follow Brooke DiPalma on X at @BrookeDiPalma or email him at bdipalma@yahoofinance.com.