By Theo Francis and Heather Haddon

Middle-class and lower-income Americans are in belt-tightening mode.

Plunging consumer confidence is pummeling the financial results of companies that cater to middle-income households, from McDonald's to General Motors.

McDonald's reported its worst sales since the pandemic for established U.S. restaurants, after anxious middle- and low-income diners cut their spending. Sales of Harley-Davidson motorcycles dropped by 24% from a year earlier. And Hershey said it expects a 30% drop in profits if tariffs stay as they are.

"People are just being more judicious," McDonald's Chief Executive Chris Kempczinski told investors Thursday.

Some companies, especially in technology, reported strong results or upbeat outlooks despite global economic uncertainty. Apple sales surged on growing iPhone demand, which analysts said could have come from panic-buying before new tariffs went into effect.

But analysts warned that continuing uncertainty in the U.S. posed real risks to the domestic and global economies.

"The risks of a U.S. and global recession are growing," Grace Fan, an analyst at TS Lombard, wrote in a note to investors Thursday. "The greatest risk is that ongoing market volatility triggers reflexivity, sending corporate and consumer confidence plummeting, with indications that this is already happening."

At McDonald's, only higher-income consumers kept buying at a steady clip. Middle-income customers cut back on visits, though not as much as lower earners, executives said.

Chipotle, Starbucks, Pizza Hut, KFC and Domino's Pizza have also warned of sagging U.S. sales.

"Until people are more confident that they know what's going on, they aren't going to be reaching into their savings," Domino's CEO Russell Weiner said in an interview.

Harley-Davidson said the uncertain economic outlook and high interest rates stifled demand in the U.S. and globally.

Executives said the motorcycle-maker is considering price increases among strategies to mitigate its tariff costs, while recognizing limits to the approach. "We have to also be cognizant of the current recessionary environment for discretionary leisure products," CEO Jochen Zeitz told investors on Thursday.

Americans bought cars and trucks sooner to try to get ahead of tariffs. General Motors said Thursday that its sales growth outpaced other major automakers to start the year, but an estimated $4 billion to $5 billion in looming tariff costs led the company to cut its annual profit forecast by $2 billion to $3 billion.

GM said it expects to raise North American prices by as much as 1%, even after President Trump softened the impact of tariffs on automakers this week. Before the tariff hikes, GM expected prices to decline 1% to 1.5%. About half the vehicles GM sells in the U.S. are made domestically, while its most affordable brands, including the Chevrolet Trax and Buick Envista, are imported from South Korea.

Hershey said its sales of candy, mints and gum fell 15% in the first quarter and executives continue to see "a consumer focus on value." Tariffs on ingredients like cocoa beans will cost the company $15 million to $20 million this quarter alone, and the company said it expects to raise prices later in the year, executives said. The candy giant is seeking an exemption for its key ingredient because cocoa can't be grown domestically.

Write to Theo Francis at theo.francis@wsj.com and Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

May 01, 2025 19:06 ET (23:06 GMT)

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