McDonald’s on Thursday said traffic to its U.S. restaurants is growing, helping the fast-food giant top analysts’ expectations for its quarterly earnings and revenue.
The company is bucking a trend seen by other chains,┬аwhich┬аhave┬аreported shrinking┬аtraffic after raising menu prices. Many restaurants, including McDonald’s and its franchisees, have turned to price hikes to mitigate higher food and labor costs, but inflation-weary customers have been cutting back on eating out to save money.
McDonald’s executives spoke openly about the challenges its restaurants are facing during the company’s earnings call. CEO Chris Kempczinski said there’s increasing uncertainty and unease about the economic environment. CFO Ian Borden told analysts that inflationary pressures and interest rate hikes are putting “significant pressure” on consumers and the restaurant industry.
Shares of the company rose about 2% in premarket trading.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.68 vs. $2.58 expected
- Revenue: $5.87 billion vs. $5.69 billion expected
The company reported third-quarter net income of $1.98 billion, or $2.68 per share, down from $2.15 billion, or $2.86 per share, a year earlier.
Net sales fell 5% to $5.87 billion. Excluding the impact of foreign currency, McDonald’s revenue rose 2% in the quarter.
Worldwide, the company’s same-store sales climbed 9.5%, beating StreetAccount estimates of 5.8%┬аgrowth. All three of McDonald’s divisions topped Wall Street’s expectations for same-store sales growth.
In McDonald’s home market, same-store sales increased 6.1%. The company credited price hikes and an increase in customer visits, fueled by marketing promotions.
McDonald’s price hikes have scared away some of its lower-income customers, who aren’t visiting as frequently or are trading down to cheaper menu items as inflation puts pressure on their budgets. But McDonald’s is also pulling in more higher-income customers, who are opting for fast food over dining at a full-service restaurant.
Outside the U.S., McDonald’s reported even┬аstronger┬аsame-store sales growth. In markets where the company owns its restaurants, same-store sales rose 8.5% in the quarter. That division includes Germany, France, Australia and the United Kingdom.
“Even as U.K. customers grapple with cost of living and energy impacts, our customers are coming back to McDonald’s because of the value we offer,” Kempczinski said.
Executives said the chain may offer financial support to European franchisees who are struggling with inflation, similar to aid it offered during Covid lockdowns.
In countries where licensees operate McDonald’s locations, same-store sales climbed 16.7%, fueled by strong growth in Brazil and Japan. China, however, continued to report same-store sales declines as regional lockdowns hampered its recovery.
This story is developing. Please check back for updates.
