Commodities prices are getting to McDonald's (NYSE: MCD), again. According to Reuters, "McDonald's Corp said on Thursday it was considering further price increases, but would do nothing that slowed customer traffic into its global network of stores."
That may be wishful thinking. In a recession, even modest increases in prices can drive consumers away in droves. The company will still have a Dollar Menu, but that dollar will buy a bit less in terms of food and drink.
McDonald's is indeed playing with dynamite if it tries to get a bit more money out of its customers. People can still buy a can of beans and eat at home.
McDonald's could make the choice of keeping prices level and taking slightly smaller margins. It could go to its investors and say that its operating income could fall by a modest amount because customer loyalty is more important long-term than earnings-per-share are short-term.
If it does those things, its shareholders should be happy.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
8-07-2008 @ 11:52AM
Brad Kirkland said...
Before you spew rhetoric from the tips of your keyboard fingers,try going back to economics 101 and realize that when minumum wage went up,a price increase was inevitable.Dont worry,those beans are gonna cost more soon too.
8-07-2008 @ 5:22PM
johnclrdsprn said...
Can of beans? A lttle over dramatic, I would say! Get a hold of yourself!!!At $ 4.00 per gal+ for gas and you wring your hands on a few cents more for a Big Mac! I have to scoff at this article!!!!!!!
8-08-2008 @ 11:13PM
ObamaFanna said...
Great post, personaly i think peep are better off with the can of cold beans, more nutrition and less acne.
No one gets paid min wage, it is not a living wage & McDonalds should set the pace by lowering prices and fighting inflation. Maybe giving half price deals to those that rollerblade or car pool to the store to stuff their fat faces, .
What little is lost in profits could be made up for in publicity and public opinion.