Despite Price Hikes, McDonald's Reports Positive U.S. Sales
Mcdonald's reported stronger than expected results in its most recent quarterly report. The fast-food giant was up against a difficult economic environment and several setbacks but was able to increase sales overall for the period.
One of the hardest hits to McDonald's business was closing all Russian storefronts back in May. Russia's invasion of Ukraine meant that operating in the country was no longer "consistent with McDonald's values." McDonald's had already suspended business in the country but chose to take a more decisive stance by closing and eventually selling the physical locations in Russia. This decision would cost the company $50 million in monthly sales, and $100 million in wasted food products. The sale also cost McDonald's a $1.2 billion charge that caused a 46% drop in profits (via AP). CNBC also notes the closures likely contributed to the 3% drop in overall sales.
McDonald's customers also saw elevated prices this year as well. Grocery Dive notes that the company raised its prices by an average of 8% in the first quarter of 2022. Mashed reports that McDonald's also did away with its popular dollar drink promotion as well.
sales increased 3% for the quarter
Despite these challenges, the home of the golden arches had solid returns for its second quarter. In its quarterly report, the company reported that global comparable sales reported 9.7% increases overall. CNBC reports that its total reported revenue was $5.72 billion, which was just below the expected $5.82 billion expected by data analysts Refinitiv. McDonald's did perform better than expected in regards to its earnings per share though which was eight cents higher than expected at $2.55 per share. It also reported a second-quarter net income of $1.19 billion, or $1.60 per share. This is down from the same period last year which totaled $2.22 billion, or $2.95 per share.
Overall sales were up as well. McDonalds reported a U.S. same-store sales increase of 3.7% in the quarter (via CNBC). This is higher than the 2.8% estimated by StreetAccount. McDonald's credited the combination of "strategic price hikes" along with value options for keeping sales strong. Its struggles aren't over yet though.
"We now face war in Europe, inflation is running at the highest levels in 40 years, interest rates are rising to levels we haven't seen in years. All of this is contributing to weak consumer sentiment around the world and the possibility of a global recession," said CEO Chris Kempczinski per CNBC.
The outlet also reports that McDonald's is still projecting 12% to 14% inflation for food and packaging through the end of the year across the United States as well.