McDonald’s fears a global recession, even though its hamburger restaurants are doing fairly well. Especially in Europe, consumer confidence is falling fast.
Gain in market share
In the second quarter of this year, the fast-food chain McDonald’s felt the consequences of the closures in Russia and Ukraine. The company withdrew permanently from Russia, costing the chain 1.2 billion dollars (1.18 billion euros). Net revenue fell by 3%, while profits almost halved.
Inflation weighed on the company’s profits as well, despite price increases. Nevertheless, the remaining profit of 1.1 billion dollars exceeded expectations. Global sales of existing restaurants rose 9.7% in the last quarter, driven by strong international growth. Europe even grew by 13%, mainly due to France and Germany, where McDonald’s took market share from other fast food chains.
Inflation reaches record levels
However, in many European countries, including Germany, Spain and France, consumer confidence is falling, sometimes to record lows, the burger company told CNBC. McDonald’s is also forecasting 12 to 14 percent inflation on food and packaging in the US for the year as a whole, and even more in Europe. Only in the fourth quarter does the chain expect any improvement. As a result, some US consumers are already turning to cheaper alternatives.
CEO Chris Kempczinski doesn’t sound very optimistic about the future: “We now face war in Europe, inflation is running at the highest levels in 40 years, interest rates are rising to levels we haven’t seen in years. All of this is contributing to weak consumer sentiment around the world and the possibility of a global recession.”