McDonald's reported earnings today and shares are trading close to flat.
Here are some comments from the company:
- Overall had a slight dip in traffic in Q3
- Traffic from low-income consumer was negative across industry but McDonald's continued to have traffic growth
- Pricing level has started to come down in terms of the rate of increase
- Average pricing level in the US business for the full year will be just over 10%
- Seeing no change at all in terms of customer acceptance on pricing
- There is a step-up in promotion by some competitors but nothing alarming on that
- We continue to grow share across markets despite the cost of living pressures
- Top line growth continued to moderate
- Sees 'challenging macro environment'
The comments from McDonald's mostly underline what markets have already figured out. The low-income customer is starting to struggle but overall spending is holding up. Now some of that might be that McDonald's has won the fast food wars, in one of the all-time great achievements of capitalism but there is no sudden stop in consumer spending, even with rates high.
The one comment that should worry the Fed is that -- despite big jumps in pricing -- McDonald's noted little consumer push back. Fast food is visibly more expensive now and McDonald's' competitors are competing on price and promotions but it's not stopping the spending. That's a strong economy, though it is slowing.
Overall, what McDonald's is talking about sounds exactly like a soft landing.
