Is McDonald’s weathering the recession? Consumers are saying yes to the value menu and no to “Would you like fries with that?”

McDonald’s Corporation MCD has jumped nearly 6% since reporting its second-quarter financial results on Tuesday before the market opened.

The fast-food giant posted mixed results, reporting EPS of $2.55 compared to analysts’ consensus estimate of $2.47. McDonald’s missed revenue, reporting a 3% drop in sales from the same period last year to $5.72 billion, which missed the consensus estimate of $5.82 billion.

For the second quarter, McDonald’s showed High increase in France, Germany, Brazil and Japan, but in China, the ongoing restrictions and lockdowns related to COVID-19 have hurt the company’s turnover. Temporarily closed restaurants in Ukraine also dented McDonald’s revenue.

Why is this important: In the United States, amid soaring inflation and rising interest rates, McDonald’s was able to increase sales slightly by raising the prices of some of its menu items. The price increase caused customers, especially those in lower-income households, to switch to McDonald’s value menu and order fewer combos, while visiting less frequently.

With the cost of groceries rising faster than restaurant menu items, McDonald’s executive Chris Kempczinski waits to see the restaurant’s profit, however. Over the past 12 months, inflation has driven the average price of groceries up 12.2%, while restaurant menu items have increased 7.7% over the same period.

See also: Why is Beyond Meat Stock Trading lower?

And after: Although McDonald’s offers cheaper food than many other restaurants and may even be a cheaper option than eating at home, soaring inflation and rising interest rates have consumers thinking carefully. to their expenses. While McDonald’s may fare well in a slowing economic landscape, other more expensive quick service restaurants may suffer.

The full scope of how the current economic situation is affecting the restaurant industry will become clearer next week after Starbucks Corporation SBUX and parent of KFC, Pizza Hut and Taco Bell Yum! Marks, Inc. YUM report their income on August 2 and 3, respectively.

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