McDonald’s Q3 sales growth slows amid tough consumer backdrop, new drinks push

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

The results showed that same-store sales grew by 1.5% year over year, a tick above the 1.4% growth Wall Street expected, according to Bloomberg estimates. In Q3 last year, McDonald’s posted same-store sales growth of 3.6%.

In the US, the company posted a 0.2% decline in comparable sales, slightly narrower than the expected 0.5% drop. Data from Placer.ai showed visits to the Golden Arches declined from a year ago, but the company said customers spent more when they did go.

McDonald’s stock rose 5% on Wednesday.

As Kempczinski said at the company’s investor day in September, trends improved throughout the quarter. Promotions in October, particularly on its app, led to some strength ahead of the holiday season.

“We’re taking the right steps to improve our near-term performance in the US, and I’m encouraged by our baseline traffic trends in September and October. At the same time, beverages continues to perform well and are contributing to incremental check growth,” CEO Chris Kempczinski told investors on an earnings call.

McDonald’s Red Bull energy drink provided a boost to the overall category, without taking away from other items on the platform. CFO Ian Borden said McDonald’s could use more beverages but needs to update the back of the house to make it possible.

The company is leaning into holiday offerings beginning on Nov. 3. McDonald’s unveiled a limited-time lineup consisting of a cookie butter coffee or latte, a cranberry-infused Sprite drink, and a cranberry-flavored Red Bull energy drink.

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

Ahead of the results, BTIG analyst Peter Saleh said “lower-income challenges, disappointing promotions and overly crowded marketing calendars” were top concerns among franchisee operators in the quarter.

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 didn’t fully engage with the company’s under-$3 offerings.

Kempczinski said the $5 and $6 Meal Deals “have become a proven platform to drive incremental sales,” with sales of those meals alone up 7% year over year. He added that McDonald’s needs to get “entry-level value right — it’s [the] final piece that’s missing.”

Last week, McDonald’s began an eight-week test of two value options across breakfast, lunch, and dinner with about 1,900 restaurants.

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 a return of the 90s-style restaurant design to regain customers who left for other chains, like Burger King (QSR).

The company plans to launch Archy, its AI drive-through system, in the majority of US restaurants by the end of 2027 and to test it internationally throughout 2027.

McDonald’s said it plans to invest $8.5 billion through 2036 to support restaurant tech updates with rent relief and capital. It intends to deliver roughly $5 billion of that investment by 2030.

According to Saleh, franchisees’ reactions to the NEXT growth strategy are mixed.

“Franchisees [are] highly skeptical that level of margin gain is possible, unconvinced a broad remodel program is needed, and noting very few details about cost and co-investment have been shared,” Saleh wrote. “Without a significant reduction in build cost and more field-testing, we don’t believe Project NEXT can proceed.”

Kempczinski said the company is currently having conversations with franchisees, saying that he feels “overall good about where franchisees are on NEXT.”

McDonald’s operators are expected to update the restaurants’ look and feel as part of a 10-year remodel cycle, per McDonald’s, and Kempczinski said those costs typically add up to $400,000 to $450,000 per restaurant.

Deploying the suite of McDonald’s productivity improvements will cost franchise operators an additional $800,000 per US restaurant. For international markets, it will run operators around $650,000 to $750,000.

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