The news: McDonald’s is losing ground with lower-income consumers, according to Numerator data reported by Business Insider.

• Spending from households making $40,000 or less annually fell 2.4% YoY during McDonald’s most recent quarter, the equivalent of $310 million in lost sales.
• The decline marks the first time McDonald’s has lost spending from the cohort in the past four quarters.

What it means: McDonald’s struggle to engage lower-income consumers was reflected in the company’s Q2 performance, when US same-store growth slowed to 0.8%. That was its lowest rate in over a year, prompting the QSR to replace its US leadership and move with urgency to revive traffic. At the time, McDonald’s blamed inconsistent execution of its value platform—including an uneven rollout for its under $3 meal deals and a pullback in digital offers—for the slowdown.

But the Numerator report indicates that McDonald’s challenges go beyond insufficient value messaging. Rival Burger King saw a 0.3% increase in spending from the cohort during the same period, suggesting that its brand and menu elevation efforts are more effective at converting financially pressured consumers than discount-oriented campaigns.

Implications for consumer spending: Diverging performances for McDonald’s and Burger King reveal the nuances in lower-income consumer behavior. While these households are under greater financial pressure than more affluent cohorts, their perception of value, whether in a restaurant or retail setting, extends beyond price to include quality and service. In a highly promotional environment, the brands most likely to stand out are those that can combine discounts with compelling products and experiences.