You know the economic storm clouds are gathering whenever McDonald's becomes unaffordable for the working poor tier of the consumer base.
CNBC reports McDonald's CEO Chris Kempczinski said consumers are beginning to push back (in some regional markets) against higher prices and ordering fewer menu items.
A $9 burger meal might not be within everyone's budget.
Kempczinski said that consumers' resistance to higher prices has come from going "off script" from the models it uses to determine pricing. "When we execute where we know we have pricing power, we do quite well, but what we do find as we try to take pricing in the areas that are maybe a little bit more sensitive, the consumer pushes back on it," he said. Additionally, Kempczinski said customers are less likely to add extras to their orders, and items per transaction have fallen by the low single-digits. Kempczinski's comments come as the consumer confidence index slipped in April as macroeconomic headwinds mount. Consumers have been battered by 24 months of negative real wage growth as inflation crushes households. About 70% of Americans admitted in a recent CNBC survey feeling financially stressed by inflation and lack of savings. Many consumers have maxed out their credit cards, while some are beginning to miss payments. There's also a rise in home foreclosures, which points to a rapid deterioration of the consumer base. Remember that an increasing number of folks can't afford their $1,000 monthly auto payment. The first report of consumers trading down items at McDonald's was nearly one year ago (read: "State Of The US Consumer: McDonald's Customers Trading Down, Buy Value Items As Combos Increasingly Unaffordable"), and that's a period when consumers were still flush with stimmy checks and other government handouts. Now it's gone, and some consumers are already trading down from fast food restaurants to "Dollar Tree Dinners." @yournameClick To Tweet
Kempczinski said that consumers' resistance to higher prices has come from going "off script" from the models it uses to determine pricing.
"When we execute where we know we have pricing power, we do quite well, but what we do find as we try to take pricing in the areas that are maybe a little bit more sensitive, the consumer pushes back on it," he said.
Additionally, Kempczinski said customers are less likely to add extras to their orders, and items per transaction have fallen by the low single-digits.
Kempczinski's comments come as the consumer confidence index slipped in April as macroeconomic headwinds mount. Consumers have been battered by 24 months of negative real wage growth as inflation crushes households.
About 70% of Americans admitted in a recent CNBC survey feeling financially stressed by inflation and lack of savings. Many consumers have maxed out their credit cards, while some are beginning to miss payments. There's also a rise in home foreclosures, which points to a rapid deterioration of the consumer base. Remember that an increasing number of folks can't afford their $1,000 monthly auto payment.
The first report of consumers trading down items at McDonald's was nearly one year ago (read: "State Of The US Consumer: McDonald's Customers Trading Down, Buy Value Items As Combos Increasingly Unaffordable"), and that's a period when consumers were still flush with stimmy checks and other government handouts. Now it's gone, and some consumers are already trading down from fast food restaurants to "Dollar Tree Dinners."
