By Anuja Bharat Mistry and Waylon Cunningham
Sept 23 (Reuters) - McDonald's warned on Wednesday that customer traffic in key markets would likely remain flat as long as inflation remained elevated, sending its shares down 5% even as it unveiled an $8.5 billion franchisee support plan and a slate of long-term growth initiatives.
The warning reinforced investor concerns that McDonald's turnaround could take longer than expected, even as it rolls out its new "NEXT" strategy to reignite growth after several
quarters of slowing sales and intensifying competition from value-focused rivals.
Last month, McDonald's missed estimates for second-quarter U.S. sales growth, citing execution missteps that hindered efforts to win back lower-income consumers who had cut back on dining out.
On Wednesday, newly appointed U.S. business head Skye Anderson acknowledged those shortcomings, saying McDonald's had fallen short on "consistent execution" and needed to improve restaurant operations.
"The winners will be the companies that create more demand and deliver it more efficiently," CEO Chris Kempczinski said during the investor meeting.
Announced in June, McDonald's "NEXT" strategy focuses on improving food quality, hospitality, value and innovation, with executives on Wednesday providing the first detailed roadmap for the plan.
The plan also includes simplifying operations, modernizing restaurant designs, investing in employee training and expanding the use of ArchIQ, its AI-powered restaurant operating system that automates tasks such as drive-thru ordering.
Anderson, who was named as president of its U.S. business last month to steer the company's turnaround strategy, said on Wednesday that McDonald's was also adapting to changing consumer preferences, including demand from GLP-1 users seeking higher-protein options and greater portion flexibility.
Anderson also added that the company is exploring bowls, grilled chicken and egg bites to expand protein-centered options across breakfast, lunch and dinner.
"Consumers are making choices based on more than price, and McDonald's needs to give them reasons to visit beyond a deal," eMarketer analyst Suzy Davidkhanian said.
As part of the plan, McDonald's outlined an $8.5 billion support package for franchisees over the next decade and set new targets for restaurant productivity and operating margins in the low- to mid-50% range by 2030.
The company expects the strategy to improve restaurant-level efficiency by 250 basis points, generating about $100,000 in additional annual cash flow for the average U.S. restaurant.
Of the $8.5 billion investment, roughly $5 billion will be deployed by 2030 through a combination of rent relief and capital support for franchisees.
The burger chain expects restaurant expansion to contribute about 2.5% of systemwide sales growth in 2027 and around 2% by 2030.
(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Anil D'Silva)
