McDonald’s earnings beat as customers return despite higher prices?
Richard and Maurice McDonald opened a restaurant in San Bernardino, California, the year they started the McDonald’s Corporation, an American global fast food franchise and real estate corporation.
McDonald’s on Thursday claimed that increased restaurant visitation in the United States had helped the fast-food juggernaut beat analysts’ quarterly revenue and profitability estimates. The business defines a pattern other chains have observed, which has experienced declining traffic following price increases on the menu. Although many restaurants, including McDonald’s and its franchisees, have increased prices to offset rising food and labour expenses, consumers weary of inflation have been limiting their dining out to save money. During the company’s earnings call, McDonald’s officials were candid about the difficulties the company’s restaurants are experiencing. According to CEO Chris Kempczinski, the economic landscape is becoming more unstable and unsettling. According to CFO Ian Borden, inflationary pressures and rising interest rates are exerting “substantial pressure” on customers and the restaurant industry.
- Revenue: $5.87 billion versus the anticipated $5.69 billion
- The company’s net income for the third quarter fell from $2.15 billion ($2.86 per share) to $1.98 billion ($2.68 per share).
- To $5.87 billion, net sales decreased by 5%. When foreign exchange effects were taken out, McDonald’s income increased by 2%.
- The company’s same-store sales increased globally by 9.5%, exceeding StreetAccount’s prediction of a rise of 5.8%. All three McDonald’s divisions surpassed Wall Street’s forecasts for same-store sales growth.
- Same-store sales in McDonald’s domestic market rose 6.1%.
- N.Y.’s shares increased by more than 3% as of Thursday’s closure.
- Our third quarter 2022 results showed widespread business momentum as comparable sales worldwide climbed by almost 10%. As our people worldwide continue to execute at a high level, I am still optimistic about accelerating the Arches plan, said Chris Kempczinski, president and CEO of McDonald’s.
The following difference exists between what the company disclosed and what Wall Street was anticipating, according to a Refinitiv survey of analysts:
The corporation attributed price increases and increased client traffic through marketing initiatives. U.S. menu prices increased by about 10% in the third quarter compared to last year’s last quarter. Although breakfast and dinner are doing significantly better than lunch, executives claimed that all day parts are functioning well. The firm anticipates same-store sales growth in the United States for October to be in the low double digits. The price increases at McDonald‘s have scared away some of its lower-income patrons. They visit less frequently or switch to menu items with lower prices as inflation strains their finances. However, McDonald’s is also attracting increasingly wealthy clients who choose fast meals over a full-service establishment. McDonald’s reported much better same-store sales abroad.
Same-store sales increased by 8.5% in the third quarter in the markets where the firm operates its restaurants. Germany, France, Australia, and the United Kingdom are included in that section. Because of the value we provide, Kempczinski said, “even while U.K. customers struggle with the cost of living and energy implications, our customers are returning to McDonald’s.” According to executives, the network may provide financial assistance to European franchisees battling inflation, similar to the service it provided during Covid lockdowns. Same-store sales increased 16.7% in nations where licensees run McDonald’s restaurants, driven chiefly by robust growth in Brazil and Japan. However, due to regional lockdowns that delayed its recovery, China continued to post same-store sales decreases.
Points
- In terms of earnings and revenue for the third quarter, McDonald’s exceeded Wall Street expectations.
- The company’s same-store sales increased globally by 9.5%, exceeding StreetAccount’s prediction of a rise of 5.8%.
- While other restaurants have also hiked their pricing, McDonald’s claims that consumer traffic is increasing in the U.S.
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