US – American multinational fast-food chain, McDonald’s Corp, expects “short-term inflationary pressures to continue in 2023” with a mild-to-moderate US recession this year, with a deeper, longer recession in Europe.
in the fourth quarter that ended on Dec. 31, McDonald’s Corp reported sales that exceeded expectations boosted by higher menu prices, increased restaurant traffic, and gains in most major markets
Its global same-store sales increased 12.6% compared with estimates for an 8.6% rise, according to IBES data from Refinitiv. Sales in the UK, Germany, and France rose despite fears of a recession in Europe.
McDonald’s US comparable sales rose 10.3% in the quarter that ended Dec. 31. Global revenue dropped 1% to $5.93 billion because of the impact of the stronger US dollar against foreign currencies, while in constant currencies, revenue rose 5%.
The net income was US$6.2 billion, down 18% from a net income of US$7.5 billion, the year before. Results for the recent year included US$1.3 billion of charges related to the sale of the company’s Russia business and a gain of US$271 million related to the sale of the company’s Dynamic Yield business.
Profit margins at company-operated restaurants were about 15% in the quarter because of higher labor, energy, and commodity costs. The company expects its full-year 2023 company-operated margins will come in slightly lower than for the fourth quarter.
The earnings report comes as investors watch for signs of a recession after record inflation last year. McDonald’s could benefit if more lower-income customers switch over from higher-priced restaurants – as it did in the third quarter.
In October, Chief Financial Officer Ian Borden said the company was “gaining share right now among low-income consumers” in the United States because of McDonald’s “affordability.”
Like other fast-food chains, Chicago-based McDonald’s raised the prices by 10% of its burgers and fries last year to keep up with surging commodity and labor costs, according to Bloomberg.
The price hikes did not deter customers as in the earnings report, the company declared that traffic rose 5% for the full-year 2022, due to its meals remaining less expensive than many competitors, drawing low-income consumers.
A Big Mac in New York City now costs about US$5.39 – less than a US$5.65 Venti Cappuccino at a nearby Starbucks, Reuters reports.
Looking ahead, the fast-food giant expects its operating margin to be about 45% in 2023, below the consensus estimate of 46.5%.
The fast-food company also has plans to build approximately 1,900 restaurants with more than 400 openings in the United States and internationally operated markets, which include Australia, Canada, France, Germany, and the United Kingdom.
The remaining 1,500 restaurants will be across McDonald’s international developmental licensed markets, including about 900 in China.
A strong, comparable sales and brand performance has “given us the right to build new units at a faster rate than we have historically,” said Christopher J. Kempczinski, president and chief executive officer.
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