USA – McDonald’s Corporation (NYSE: MCD) reported strong third-quarter results surpassing Wall Street estimates for both profit and sales.
The fast-food giant’s success was attributed to a combination of new product launches and sustained demand for its value menu items, which have remained affordable even as food prices continue to rise.
According to the company’s financial report, global comparable sales at McDonald’s surged by an impressive 8.8% in the quarter ending September 30, surpassing analysts’ expectations of a 7.36% increase.
This growth was fueled by the company’s strategic menu enhancements and the introduction of new items.
In July, McDonald’s launched the Cheesy Jalapeno Bacon quarter pounder, followed by the return of the popular Spicy Chicken McNuggets to the menu in September. These additions were credited with driving substantial sales growth during the third quarter.
While the broader dining industry experienced a decline in foot traffic throughout the quarter, McDonald’s managed to maintain its customer base, even witnessing a 7.3% increase in July, according to data from Placer.ai.
Although foot traffic strength tapered off in the subsequent two months, recording declines of 1.1% and 3.7%, it still outperformed industry trends.
McDonald’s reported a comparable sales increase of 8.1% in the United States, surpassing estimates for a 7.4% increase. This success was partially attributed to higher average spending at its stores.
Internationally, same-store sales in McDonald’s operated markets increased by 8.3%, surpassing expectations for an 8.03% growth.
The company’s ability to keep its meals affordable, despite the industry-wide price increases in 2022, has been a key factor in its continued success, countering the trend of consumers opting to eat more at home.
McDonald’s also reported a 14% increase in total quarterly revenue, reaching US$6.69 billion, exceeding estimates of US$6.58 billion.
Net income rose to US$2.32 billion, or US$3.17 per share, from US$1.98 billion, or US$2.68 per share, compared to the previous year. On an adjusted basis, McDonald’s posted a per-share profit of US$3.19, which comfortably beat estimates of US$3.00.
In response to these positive results, McDonald’s announced a 10% increase in its quarterly cash dividend, which led to a 2% rise in its share price to US$261 during premarket trading.
However, the company also acknowledged potential challenges on the horizon. McDonald’s flagged a potential impact on franchisee cash flow in California, where minimum wages for restaurant workers are set to rise to US$20 per hour next year.
Despite these concerns, McDonald’s remains optimistic about its future performance and the continued appeal of its value-driven menu items.
“Consumers continue to be more discriminating about what and where they spend…(but) we’re seeing no change at all in terms of customer acceptance… on pricing.” The company’s CEO, Chris Kempczinski, noted.
