It's A 'McDisaster'

McDonald's shares are on pace for their worst annual decline in nearly a quarter-century after the burger chain disappointed Wall Street last week at its Investor Day, with CFO Ian Borden warning that its US business would be "slightly negative" in the third quarter.

On top of that, Wall Street analysts, including Deutsche Bank's Lauren Silberman, soured on last week's developments and said the turnaround inflection point for the quick-service Big Mac chain has been delayed.

Shares of the burger giant have fallen nearly 31% from their February high and are heading for their worst annual performance since 2002.

Demand woes are emerging as the US price of a Big Mac jumped 23% between 2019 and the end of 2025, according to the Economist's Big Mac Index. While those increases helped offset higher ingredient, labor, and fuel costs, the days of a cheap burger are long gone.

"Their prices have gone up substantially, and it's no longer viewed as the best value in food," said Jacob Aiken-Phillips of Melius Research, who has the only "Sell" rating on the stock among analysts tracked by Bloomberg.

The Melius analyst noted, "I could go to Texas Roadhouse instead and have an actual sit-down experience with my family that's not that much more expensive."

What happened to MCD's quality control? 

Bloomberg pointed out that rival QSR chains are finding more traction with customers: Burger King posted US comparable sales growth of 8.5% in its latest quarter, supported by a revamped Whopper and a Star Wars promotion. Taco Bell's same-store sales rose 7% as its $5, $7 and $9 meal boxes attracted customers.

McDonald's answer to sagging demand has been an $8.5 billion multiyear overhaul involving technology, restaurant upgrades, food quality and service improvements, and an effort to revive its PlayPlaces, but the turnaround plan failed to ignite optimism on Wall Street.

Silberman's key quotes from her initial takeaways from Investor Day:

• US sales remain weak: "US SSS were slightly negative in July and August, and while September should be positive, 3Q SSS are expected to be slightly negative given the slow start to the quarter."
• Fourth quarter caution: "We suspect 4Q US SSS will likely remain sluggish, in part due to a tough comparison."
• Forecast cuts: "We are lowering our 3Q/4Q US SSS to -0.5%/-1% (from flat)."
• The capex bill: "We estimate the total system investment for NEXT will cost ~$19BN, implying MCD will contribute ~45%."
• AI and productivity upside: "We walk away with increased conviction in the company's ability to improve unit economics by unlocking productivity through the implementation of its ArchIQ technology platform."

Read Deutsche Bank's report here. McDonald's play fits into a broader theme UBS equity trader Mark Paski recently warned about: Wall Street has turned its back on consumer stocks. An expensive turnaround is a tougher sell when working-poor customers can no longer afford pricey Big Macs.