McDonald's Exceeds Profit Expectations Amid Inflation

McDonald's Exceeds Profit Expectations Amid Inflation

News by Roberto Orosa
Published: February 01, 2023

Fast food chain giant McDonald’s reported that increased U.S. customer visits and product pricing had helped it top Wall Street’s estimated earnings and revenue in its fourth quarter. 

This is the second consecutive quarter where it increased its store traffic despite consumers cutting back on restaurant spending due to inflation.  

According to CEO Chris Kempczinski, the performance of the fast-food chain exceeded expectations. “Overall, the consumer, whether it’s in Europe or in the U.S., is actually holding up better than what we would have probably expected a year ago or six months ago,” he said in a company conference call.  

Mcdonald’s is still expecting short-term inflation in 2023, but company executives believe it has reached its peak. The CEO also said Mcdonald’s is anticipating a U.S. recession, as well as a “deeper and longer” downturn in Europe sometime in the future.  

The fast-food giant reported a fourth-quarter net income of $1.9 billion ($2.59 per share), up from $1.64 billion ($2.18 per share) in the previous year. Its net sales also fell 1% to $5.93 billion, but went up 5% when it disregarded foreign currency changes.  

In its home market, higher demand and menu prices drove store sales growth of 10.3%, beating StreetAccount predictions of 8.1% Mcdonald’s also shared that its McRib “farewell tour” promotion performed well, given that it only sold for a limited time. 

The fast-food chain also hopes to open 1,900 new restaurants, with a budget of $2.2 billion to $2.4 billion on capital expenditures. They plan for 400 of the restaurants to be located in the U.S. and internationally operated markets, while the rest are opened by developmental licensees.  

More than two weeks ago, McDonald’s also reported a massive job cut as a company reorganization effort, stating that the existing “outdated and self-limiting" structure is holding back the growth and expansion of the company.  

"There will be difficult discussions and decisions ahead," Kempczinski said in his memo. 

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