McDonald’s Corp. sales handily beat expectations as diners proved willing to pay more for their fries and burgers while grappling with inflation in their gas, grocery and energy bills.
The results underscore why McDonald’s feels like it’s in a good position even as clouds gather in the economy. The company is picking up customers as rivals across the industry raise prices. The chain said U.S. guest counts increased in spite of higher menu prices, with online and mobile sales, core items and delivery bolstering performance.
“We expect to experience a mild to moderate recession in the U.S., and one that will be potentially a little deeper and longer in Europe,” Chief Executive Officer Chris Kempczinski said on a conference call with analysts on Thursday.
Shares of McDonald’s rose 3.6 per cent at 10:24 a.m. in New York trading. They had lost 4.3 per cent this year through Wednesday’s close.
Same-store sales, a key indicator for restaurants and retailers, rose 9.5 per cent in the third quarter, surpassing the 5.8 per cent gain that was the average of estimates compiled by Bloomberg. Earnings of US$2.68 per share also exceeded analysts’ projections.
In the U.S., comparable sales are accelerating and are expected to be up in the low double digits for October. While that speaks to the strength of diners, inflation is persisting. The fast-food company said cost pressures for food, paper, wages and energy are expected to hurt margin for the next several quarters.
Earnings per share declined 6 per cent from last year. A stronger dollar eroded some profitability.
Echoing comments from Chipotle Mexican Grill Inc. earlier this week, Kempczinski referred to macroeconomic “uncertainties” -- the latest sign that companies are having trouble forecasting the immediate future. Nonetheless, McDonald’s is “operating from a position of competitive strength,” Kempczinski said in a statement.
While menu price increases and value items are helping fuel sales in McDonald’s home market, the chain is still struggling with COVID-19 restrictions in China.
Revenue of $5.87 billion beat the average estimate of $5.71 billion. Operating income also surpassed estimates.
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