Big Mac, Small Margin: McDonald’s Feels the Fryer Heat
Inflation, anxiety, and a fractured U.S. economy are squeezing McDonald’s core customers—and Wall Street is taking notice.
Editorial Team (ET)May 7, 2025
McDonald’s has long been seen as a bellwether for the American consumer, a golden-arched gauge of economic health. But this quarter, the fast food giant delivered more indigestion than optimism. On May 1, 2025, McDonald’s reported first-quarter earnings that came in below Wall Street’s expectations, missing revenue estimates and revealing a troubling drop in U.S. same-store sales. Global comparable sales dipped 1%, but the real stomach-turner came from the company’s home turf, where sales dropped 3.6%—well beyond analysts’ projections.
The message from CEO Chris Kempczinski was clear: America’s economic divide is deepening. In a call with analysts, he didn’t mince words. He pointed to a sharp decline in foot traffic from both low- and middle-income customers, describing the pullback as “nearly double digits” quarter-over-quarter. Meanwhile, high-income customers? They kept showing up. That contrast laid bare what he called “a divided U.S. economy,” where inflation and anxiety are hammering the company’s core demographic—its loyal, budget-conscious base.
This wasn’t a one-off misstep. McDonald’s revenue clocked in at $5.96 billion, missing the $6.12 billion Wall Street had anticipated, marking a 3% decline from the previous year. Adjusted earnings per share landed at $2.67, just under the $2.68 analysts expected. And while that shortfall may seem slight, the miss sent McDonald’s shares down as much as 1.2% in early trading. For a company with the size and scale of McDonald’s, even a fractional slip can signal broader structural stress.
The economic conditions fueling this slowdown aren’t new, but they are worsening. Inflation continues to pressure household budgets, and the political landscape—particularly President Trump’s aggressive trade stance—has left many Americans with a growing sense of unease. The latest economic data only adds fuel to the fire: the U.S. economy contracted in Q1 2025 for the first time in three years, reinforcing fears that a recession may not just be looming—it might already be here.
The impact on McDonald’s was predictable yet painful. Bernstein analyst Danilo Gargiulo summed it up bluntly, writing that the results were “not a surprise,” as consumer weakness among lower-income households has been an ongoing concern. That matters, because those households form the very foundation of McDonald’s business model. This is not Shake Shack chasing urban millennials or Sweetgreen courting wellness-obsessed Gen Z. McDonald’s is Main Street, and Main Street is struggling.
What’s more, this isn’t the first quarter McDonald’s has faltered. Back in February, the company missed estimates on its fourth-quarter earnings as well, amid a perfect storm of declining sales and a damaging E. coli outbreak. That moment was described by Citi analyst Jon Tower as a “low point in recent history for the brand,” and the latest results don’t do much to change the trajectory.
In response, the company has tried to pull every lever available. Value menus have been revamped. Last summer, a $5 meal deal made headlines, and in January, McDonald’s launched a McValue menu aimed at luring back cost-conscious consumers. But those efforts have yet to show up meaningfully in the numbers, and analysts don’t expect any major turnaround until the second half of the year—if at all.
Despite all of this, the stock has remained relatively resilient. McDonald’s shares are up 10% year-to-date, outperforming a broader S&P 500 that’s down 5%. That’s largely due to McDonald’s status as a so-called “defensive” stock—a label recently reinforced by analysts at UBS, HSBC, and Morgan Stanley. In turbulent times, the thinking goes, people may not spring for filet mignon, but they’ll still shell out for a Big Mac. The problem now is that even the Big Mac is starting to look like a luxury for some Americans.
Outside the U.S., McDonald’s performance has been a mixed bag. The international developmental licensed markets segment, which includes 75 countries like China, Japan, and Brazil, posted a 3.5% increase in same-store sales—slightly better than the 3.3% expected. Japan and the Middle East were the star performers. Meanwhile, the international operated markets segment, covering 16 countries including the UK, Germany, and Canada, reported a 1% decline in same-store sales. That was well below the modest 0.3% increase analysts had predicted, with the UK dragging down the numbers.
Anti-American sentiment, spurred in part by Trump’s trade war, has also put pressure on global brands like McDonald’s. While China remains its second-largest and fastest-growing market, geopolitical friction has created hurdles abroad. CFO Ian Borden tried to play it cool, saying China’s performance “remained stable,” but in today’s market, stable doesn’t inspire confidence.
Still, the company reaffirmed its 2025 fiscal targets, signaling that management believes the worst may be behind them. But belief isn’t the same as proof. Consumers are anxious, incomes are strained, and the fast food landscape is evolving fast. Competitors are flooding the market with value offerings, and many Americans are simply opting to eat at home.
For McDonald’s, this is a pivotal moment. It’s no longer enough to rely on brand loyalty or cheap burgers. The economic terrain has shifted, and the company must navigate it with the precision of a fine-dining chef, not the brute force of a value-menu warlord. The Golden Arches have weathered storms before, but the current one is testing its foundation—and for now, the drive-thru doesn’t look like a safe haven.
Conclusion
McDonald’s current earnings slump isn’t just about missed estimates—it’s a reflection of a deeper, more troubling story about the American economy. As low- and middle-income consumers pull back under the weight of inflation and uncertainty, even the most iconic brands are being forced to rethink their strategies. Whether McDonald’s can regain its footing in this fractured market will depend on more than value meals and menu tweaks—it’ll require rebuilding trust with the very customers it was built to serve.
