McDonald’s stock plummets to a near two-year low

It wasn’t long ago that grabbing a Big Mac was one of America’s favorite cheap treats.

Now, with combo meals creeping towards restaurant prices, many believe the Golden Arches have lost their touch – and investors appear to be feeling the same way.

McDonald’s stock slumped to its lowest level in nearly two years, with analysts warning that falling customer traffic and slowing sales are weighing heavily on the fast-food giant.

Shares in the Golden Arches have fallen more than 13 percent so far this year, dramatically underperforming the broader market, with investors increasingly concerned that Americans are turning their backs on the chain.

The company’s shares are now hovering around their lowest point in almost two years with them closing at $264.95 on July 15, while trading at their cheapest valuation in more than a decade.

The slump comes despite McDonald’s efforts to lure younger diners with new menu items, including its heavily promoted Big Arch burger and a range of caffeinated flavored beverages launched in May, such as Strawberry Watermelon Refreshers and Sprite Berry Blast crafted sodas.

But analysts say the strategy has so far failed to reignite sales.

Citi analyst Jon Tower warned in a new note that McDonald’s struggled to overcome broader challenges facing the fast-food industry during the second quarter.

McDonald’s stock has slumped to its lowest level in nearly two years, with analysts warning that falling customer traffic and slowing sales are weighing heavily on the fast-food giant

He said the bank expects US same-store sales to fall by around two percent, while the chain’s relative performance compared with the wider fast-food sector has dropped to multi-year lows.

Tower also noted that McDonald’s US foot traffic declined by 4.6 percent year-over-year during the second quarter, with May proving the weakest month.

Investors are now waiting for the company’s next earnings report on August 4, hoping management can convince Wall Street that investments in beverages, menu innovation and restaurant upgrades will revive growth.

Susannah Streeter, Chief Investment Strategist at Wealth Club, told the Daily Mail that investors are increasingly concerned that McDonald’s is struggling to appeal to a more financially stretched customer.

‘Investors have lost their appeтιтe for McDonald’s shares as the fast-food giant struggles to serve up the right recipe for a more squeezed consumer,’ she said.

Streeter explained that the chain had built its reputation on offering an affordable meal, but households under pressure are becoming far more selective about where they spend their money. 

While McDonald’s has often benefited when diners trade down from more expensive restaurants, she said this time the financial squeeze is hitting the company’s core customer base.

‘While a handful of social media comments on sites such as Reddit don’t tell the whole story, they provide a useful insight into disgruntled customers, and the message coming through is that the brand’s value proposition isn’t what it was,’ Streeter said.

On Reddit, hundreds of diners blamed soaring prices, shrinking portions, uninspiring restaurant redesigns and declining customer service for the chain’s falling fortunes

The company’s shares are now hovering around their lowest point in almost two years with them closing at $264.95 on July 15

Looking ahead, Streeter also warned that the growing popularity of GLP-1 weight-loss drugs could create another challenge for McDonald’s, as more consumers opt for smaller portions and healthier choices. 

Despite the stock’s struggles, McDonald’s continues to generate strong profits. The company beat earnings expectations in its most recent quarter, reporting earnings per share of $2.83 on revenue of $6.52 billion, up 9.4 percent from a year earlier. 

It also announced a quarterly dividend of $1.86 per share, while most Wall Street analysts still maintain a Moderate Buy rating on the stock.

But, as noted by Streeter, the frustration spilling across social media offers another window into why the company is struggling to win back customers. 

On Reddit, hundreds of diners blamed soaring prices, shrinking portions, uninspiring restaurant redesigns and declining customer service for the chain’s falling fortunes. 

One of the most popular comments on a thread, which received more than 1,200 upvotes, argued: ‘McDonald’s raised prices as high as they thought they could get away with, redesigned its dining areas to be as warm and inviting as a DMV waiting room, replaced humans with kiosks, started charging for everything except napkins and straws… and is now reporting lower sales and foot traffic.’

Another user wrote: ‘Fast food flourished because it was cheap, and now it is way too expensive for the quality.’

They added that McDonald’s had lost its compeтιтive advantage because customers could now visit fast-casual chains such as Chipotle or Chick-fil-A for only slightly more money.

The slump comes despite McDonald’s efforts to lure younger diners with new menu items

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‘It’s not one single thing, but so many small things that add up,’ the commenter wrote, criticizing everything from the new drinks to the redesigned McFlurry cups, reduced sauce portions and increasingly sterile restaurant interiors.

Several users lamented the disappearance of the colorful, family-friendly restaurants they remembered growing up, stating the redesigned restaurants felt intentionally unwelcoming.

‘My nearby McDonald’s did a remodel a couple of years ago,’ one customer wrote. ‘It used to be bright and cheery. Now it looks like a dark federal prison with concrete and iron bars all over the place.’

Pricing was by far the biggest frustration. One customer wrote: ‘No one wants to pay $20 for a Big Mac meal. You can get better quality burgers at sit-down restaurants for the same price.’

Another said: ‘A Chipotle bowl is cheaper than a McDonald’s combo for me and it lasts two meals.’

Despite the criticism, analysts believe the company still has an opportunity to turn things around if its beverage strategy gains traction and upcoming menu innovations drive customers back through the doors.

McDonald’s remains one of the largest chain restaurants by store count, only surpᴀssed by Mixue Ice Cream & Tea.