Dive Brief:

• McDonald’s reported a 10.3% jump in Q4 U.S. same-store sales growth on Tuesday, reflecting how the chain’s domestic traffic has benefited from cost-conscious consumers trading down amid economic uncertainty. By contrast, the chain’s U.S. same-store sales increased 7.5% in the same period in 2021. 
• This growth was also driven by menu price hikes; the company emphasized the success of menu campaigns including the McRib’s “Farewell Tour” and Cactus Plant Flea Market in driving excitement around its offerings. 
• Going forward, the Golden Arches will emphasize its core menu of chicken, burgers and coffee to drive growth, CEO Chris Kempczinski said during the chain’s Q4 investor call.

Dive Insight:

Though McDonald’s has captured value-focused diners, it’s possible these customers could soon pull back on frequency if menu prices continue to rise. 

“Inflation is still high and will continue to push up ingredient costs and erode the spending power of consumers. These things could potentially take the shine off the numbers on both the top and bottom lines and will require even more effort and imagination from McDonald’s to drive trade,” Neil Saunders, managing director of GlobalData, wrote in an emailed statement. 

McDonald’s will continue to strategically innovate its national menu, however, despite volatile supply chains across the restaurant sector. 

“Chicken and coffee, in particular, offer us, I think, a good growth opportunity,” Kempczinski said on the call. ”And we're going to be focused on that with some very specific products as opposed to having that maybe be something in the past that was a little bit more left to individual markets to kind of chart their course.”

McDonald’s strategic menu price increases have strengthened the chain’s bottom line, raising operating income 8% and net income 16%, Saunders said.

“This is a robust outcome,” Saunders said. “The challenge in the year ahead is to keep this momentum going and to do so against some tougher comparatives.”

Emphasizing core menu items, which are competitively priced in the QSR space, could hold diner attention even if desire to spend wanes amid economic uncertainty. McDonald’s has already seen low-income diners buy slightly fewer items per transaction, though visits have still increased, Kempczinski said. 

“I think that's maybe something where the customer is coming in, being a little bit more cautious about how much they're ordering. They're probably spending to an absolute dollar amount, but we're seeing a little bit of an improvement around frequency with that low-income consumer,” he said.