On August 4, 2006, McDonald’s Corporation (MCD) closed the day at $35.41 per share. It was a respectable performance for the fast food giant; known for cheap, quick meals, McDonald’s had struggled in the 2000s during a time when consumers began looking at better options. They had a little cash in their pocket and it was an era of conspicuous consumption, when buying something a little better than your neighbors meant you were a little better than them in every imaginable way. Chains like Hardee’s threw down a “monument to decadence” designed to give even low-income consumers a chance to feel like kings.
A little over two years later, McDonald’s closed at $60.30 per share. We were in the middle of the subprime mortgage crisis but McDonald’s added nearly 600 stores in 2008 and same-store-sales climbed monthly. McDonald’s, Slate proclaimed the following year, “won the recession.”
“In 2008, after a decade of relentlessly trading up to higher quality (read: more expensive) consumer goods and services, Americans began to trade down with a vengeance,” wrote Slate contributor Daniel Gross. He noted that McDonald’s was a place where families could still eat out while pinching pennies. The chain added more coffee options, luring less picky consumers from chains like Starbucks with its mediocre-but-fine mochas and iced coffees. While McDonald’s rode high at over $60 per share, Starbucks hovered around $8.
Today, a share of Starbucks will cost you over $100. But a share of McDonald’s? That’s going to run you over $250. The market is confident in McDonald’s success. In fact, the market is confident in the success of nearly every fast food chain. They’ve seen growth with delivery, celebrity endorsements, and an app-based loyalty program. Above it all, though, the surest indicator of future success for McDonald’s is a precarious economic situation.
Inflation is at its highest in thirty years, which means a dollar doesn’t go as far as it used to. This is true everywhere – including at McDonald’s, where menu prices have increased because of supply chain issues and a labor market that’s forcing the burger chain to increase notoriously low wages. Still, for a consumer, McDonald’s is a cheap option compared to a finer diner; an $8 meal becoming a $12 meal at McDonald’s is perhaps easier to stomach than a $15 meal becoming a $20 meal.
In 2020, McDonald’s CEO Chris Kempczinski said that he believed consumers were concerned about the economy, a concern that would outlast the COVID-19 pandemic. Concerns about the economy are good signs for his business; journalist Rob Walker wrote later that year that a “bright future for McDonald’s, it turns out, isn’t particularly great news for the rest of us.”
While economic indicators look weak, Treasury Secretary Janet Yellen has tried to soothe concerns about the long-term fiscal health of the country. “You should see [inflation] as consequence of recovery from a very severe shock due to the pandemic and something that will work itself out over time,” she told Marketplace‘s Kai Ryssdal on November 9.
If not, we know one clown who’ll be having a good 2022.