McDonald's shares slip after downgrade spurred by weight-loss drug popularity

CBS News

10-06-2025

McDonald's shares dropped Tuesday as weight-loss drugs threaten to take a big bite out of the fast food chain's earnings.
Shares were down by as much as 1.7% Tuesday, after equity analysis firm Redburn Atlantic downgraded the burger giant's stock rating two notches, from buy to sell.
Changes in Americans' eating habits spurred by the use of the class of drugs known as GLP-1s, which are designed to help regulate users' blood sugar and appetite, pose an underappreciated threat to some food businesses, according to Redburn Atlantic analysts Chris Luyckx and Edward Lewis.
As a result, McDonald's could lose up to 28 million customer visits, resulting in a revenue loss of $482 million per year — about 0.9% of the company's sales, according to the analysis.
The appetite-suppressing drugs are expected to have a transformative effect on how Americans consume food. At particular risk are brands that cater to lower-income consumers — a category to which McDonald's belongs.
That's because spending on food away from home among lower-income households who start using GLP-1 drugs declines and tends to remain depressed, according to the report, creating "material implications for chains with broad mass-market exposure."
Higher-income users of the drugs, by contrast, decrease their spending before reverting to old spending patterns within one year, the analysis found.
"Behaviour changes extend beyond the individual user — reshaping group dining, influencing household routines and softening habitual demand. A 1% drag today could easily build to 10% or more over time, particularly for brands skewed toward lower income consumers or group occasions," the analysts said in a research note.
Pricing fatigue
Inflationary pressures and consumers' strained budgets only compound problems for McDonald's, according to the report.
"Consumers are showing clear signs of pricing fatigue after years of aggressive menu inflation," the analysts wrote. "Although the gap between eating out and at home has narrowed, it remains historically wide, reinforcing value concerns."
The Redburn analysis refers to GLP-1 drugs like Ozempic and Wegovy as "demand disruptors" for restaurants like McDonald's, because they reduce users' appetites and limit the number of calories they consume each day. These features of the drugs "could have serious implications for the restaurant industry," Redburn analysts wrote.
To be sure, adoption of the drugs is not yet widespread, with just 12% of U.S. adults ever having tried the meds. Currently, only 6% of the adult population uses the drugs.
Wider adoption of GLP-1 drugs for weight loss could ultimately lead to a broad-based reduction in Americans' caloric intake at restaurants, including fast food joints, reversing a decades-long trend. From 1977 to 2018, the total share of calories consumed at restaurants nearly tripled, according to Redburn Atlantic's analysis of U.S. Department of Agriculture data.
Compared with other fast food brands, McDonald's is the most exposed to taking a hit from the increased usage of GLP-1 drugs, according to the research.
More pressing challenges
However, Peter Saleh, managing director and restaurant and food distributors analyst at BTIG global financial services, said McDonald's is facing other headwinds, and he wouldn't expect GLP-1s to meaningfully eat into its earnings, at least not in the near-term.
For one, McDonald's core customer base consists of low- and middle-income consumers who are unlikely to be able to afford GLP-1 drugs, said Saleh, who doesn't foresee there being much overlap between the fast food giant's patrons and adopters of the drugs.
"I don't think there would be a meaningful GLP-1 impact on McDonald's right now, but that's not to say that in three or four years that won't be the case," he said. "I just don't think we are there yet."