McDonald’s Finds Cheap Food Is Too Expensive

By Douglas A. McIntyre Published Jul 23, 6:20AM EDT

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McDonald’s Finds Cheap Food Is Too Expensive — © Joe Raedle / Getty Images News via Getty Images

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The $5 meal was supposed to bring back consumers who thought McDonald’s Corp. (NYSE: MCD | MCD Price Prediction) menu was too expensive.
Investors don’t appear to think it will reverse McDonald’s fortunes.

The $5 meal was supposed to bring back consumers who thought McDonald’s Corp. (NYSE: MCD) menu was too expensive. For years, fast food was an alternative to full-service restaurants or eating at home. Even management said that customers wanted what McDonald’s used to have. That was often unhealthy, high-calorie meals that tasted good and were available for $10 or less.

The $5 meal was complete, at least as far as McDonald’s management was concerned. It includes small drink, a sandwich (chicken or beef), and French fries. The meal has 1,000 calories, just more than the Double Smoky BLT Quarter Pounder with Cheese, which has 900 calories.

The $5 meal was supposed to help the entire industry. Wendy’s and Burger King launched them, but the companies’ management did not say much after that.

Investors must think the $5 meal will not reverse McDonald’s fortunes. Its stock is down over 12% this year, while the S&P 500 is 17% higher.

When McDonald’s last announced earnings, CEO Chris Kempczinski said. “As consumers are more discriminating with every dollar they spend, we will continue to earn their visits by delivering leading, reliable, everyday value and outstanding execution in our restaurants.” On the next earnings call, he needs to say something more optimistic. In the most recently announced quarter, revenue rose only 5% to $6.2 billion. Net income was up 7% to $1.9 billion. It wasn’t good enough.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.