McDonald’s revenue flash as customers delivers despite more elevated costs

November 01, 2022: -On Monday, McDonald’s said traffic to its U.S. restaurants is increasing, helping the fast-food giant top analysts’ anticipations for its quarterly earnings and revenue.

Many restaurants, which include McDonald’s and its franchisees, have turned to cost hikes to mitigate increased food and labor costs. The company bucks a trend seen by different chains, which have reported shrinking traffic after increasing menu prices. Still, inflation-weary customers cut back on eating out to save money.

McDonald’s executives spoke openly about its restaurants’ challenges during the company’s earnings call. CFO Ian Borden stated to the analysts that inflationary pressures and interest rate hikes put “significant pressure” on consumers and the restaurant industry. CEO Chris Kempczinski added that there’s increasing uncertainty and unease about the economic environment.

The company reported a third-quarter net income of $1.98 billion, or $2.68 for each share, down from $2.15 billion, or $2.86 for each share, a year earlier.

Net sales decreased by 5% to $5.87 billion. It does exclude the impact of foreign currency; McDonald’s revenue improved by 2% in the quarter.

Worldwide, the company’s same-store sales surged 9.5%, beating StreetAccount’s 5.8% growth. All three McDonald’s divisions topped Wall Street’s expectations for a same-store sales surge.

In McDonald’s home market, same-store sales increased by 6.1%. The company credited price hikes and increased customer visits fueled by marketing promotions.

McDonald’s price hikes have scared away a few of its lower-income customers, who do not visit frequently or are coming down to lesser menu items as inflation puts force on their budgets. But McDonald’s is pulling in much more income customers, opting for fast food over dining at a full-service restaurant.

Outside the U.S., McDonald’s reported even more robust same-store sales growth. In markets where the company owns its restaurants, same-store sales increased by 8.5% in the quarter. That division includes Germany, France, Australia, and the United Kingdom.

“Even as U.K. customers grapple with the cost of living and energy impacts, our customers are returning to McDonald’s as of the value we offer,” Kempczinski said.

 

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McDonald’s revenue flash as customers delivers despite more elevated costs