McDonald’s ‘value’ menus are now feeding the affluent

Faced with slowing foot traffic and growing price sensitivity among its core customers, McDonald’s (MCD) managed to boost third-quarter sales, but not for the reason many expected.

In its fiscal third quarter, the fast-food giant reported a 2.4% year-over-year increase in U.S. same-store sales, driven largely by higher-income consumers seeking affordable dining options amid elevated restaurant prices elsewhere.

Lower-income customers, who have long been considered the foundation of McDonald’s, continue to retreat as the affordability crisis squeezes household budgets.

In an effort to reassert its value proposition, McDonald’s has rolled out multiple promotions this year, including a “McValue” menu and the return of Extra Value Meals with temporary discounts.

Yet, ironically, those offers have proven more appealing to wealthier diners than to the lower-income consumers that were once a staple of the McDonald’s dining experience.

Data from eMarketer suggest that higher-income consumers are among the most value-conscious spenders. For them, McDonald’s still represents a cheaper alternative to full-service restaurants or premium fast-casual chains.

“We continue to see a bifurcated consumer base with [quick-service restaurant] traffic from lower-income consumers declining nearly double digits in the third quarter, a trend that’s persisted for nearly two years,” McDonald’s CEO Chris Kempczinski told shareholders.

The bifurcation Kempczinski referred to reflects a broader economic trend — a widening divide between higher- and lower-income consumers.

A split economy is driving divergent spending habits

The forces shaping McDonald’s fortunes have less to do with burgers and fries and more to do with the reality that the U.S. is experiencing a so-called “K-shaped economy,” in which the post-pandemic recovery has disproportionately benefited wealthier Americans.

As a result, consumers are diverging sharply in their spending patterns, from fast food to durable goods.

Affluent households continue to enjoy the “wealth effect” from surging stock prices and asset values — assets they hold in far greater concentration than lower-income Americans. Yet, that prosperity may be misleading.

As InvestorsObserver reported, much of the stock market’s recent strength has been concentrated in AI-related companies, masking broader weakness across other sectors.

Meanwhile, many everyday consumer brands are struggling. Major staples producers, including Hain Celestial Group (HAIN), Newell Brands (NWL), Conagra Brands (CAG), and General Mills (GIS), have seen their shares plunge between 20% and 80% this year.

Even consumer products giant Procter & Gamble (PG) recently cautioned that “the consumer environment is not great,” citing widening gaps in spending power among its customers.

A similar pattern is emerging in industries such as autos and air travel, where wealthier households with access to cash and credit continue to prop up demand, while middle- and lower-income consumers are pulling back, according to Cox Automotive.