McDonald's shares have plunged 34% over the past seven months, making it the second-worst-performing stock on the Dow Jones Industrial Average this year, behind Nike. This downturn follows slowing US same-store sales growth, which reached an annual rate of just 0.8% in the second quarter, below the 1.1% market expectation. Executives conceded that US same-store sales would be "slightly negative" for the third quarter, a stark contrast to 3.9% growth in Q1 and 6.8% in the last three months of 2025. The company's struggles are attributed to consumers tightening their belts amid resurging inflation and rising food, energy, and labor costs, which have eroded McDonald's traditional advantage of cheap food. The average price of a Big Mac in the US has increased by a third since 2019.
In response, McDonald's unveiled its "NEXT" strategy, earmarking $8.5 billion to help franchisees modernize restaurants over the next decade. The plan focuses on increasing market share in chicken, a nearly $130 billion category growing over 5% annually, where McDonald's aims to grow its "high teens" share by 1.5 percentage points by 2030. It also includes scaling AI for tasks like drive-through ordering and improving beverage sales. Despite these initiatives, investors remain unconvinced; the stock fell 5% on the day of the announcement, hitting its lowest level since 2022. Analysts from Deutsche Bank and Morgan Stanley are skeptical, viewing the pay-off as "distant and uncertain" and questioning when US sales might rebound.
McDonald's CEO Chris Kempczinski acknowledged in August that a previous push on the value menu hadn't attracted as much traffic from lower-income consumers as hoped. The company's new strategy also targets boosting operating margins to over 50%. While the company owns or leases the real estate for most of its 45,000 global locations, generating 62% of its $26.9 billion in revenues from rent, royalties, and fees, investors are hesitant until the "NEXT" strategy demonstrates tangible sales improvements. A 1.5 percentage point gain in chicken market share by 2030 is estimated to translate into 5-6% growth in McDonald's total system sales over the period, but the timeline for these gains is a concern for the market.
