Price increases help McDonald's beat profit estimates

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[April 28, 2022]   (Reuters) -McDonald's Corp beat estimates for quarterly sales and profit on Thursday as the world's largest fast-food chain benefited from price increases in the United States and the launch of a new loyalty program.

 The logo for McDonald's restaurant is seen in Arlington, Virginia, U.S., January 27, 2022. REUTERS/Joshua Roberts
 

Shares of the burger chain rose about 2.6% to $253.49 in premarket trading.

Rising wages due to a tight labor market and soaring costs of ingredients such as chicken and beef have forced U.S. restaurant chains to hike prices, which have seen little resistance from consumers so far.

McDonald's investments in delivery services, digital restaurant kiosks and drive-thru lanes have also given it an edge over smaller fast-food chains, which have been forced to cut down on operating hours due to staff shortages.

The introduction of a loyalty program late last year, letting subscribers on McDonald's app earn points that can be redeemed on burgers and fries, has also helped drive a 3.5% increase in first-quarter comparable sales in the United States, its biggest market.

Analysts expected an increase of 3.3%, according to Refinitiv IBES.

Global comparable sales rose 11.8%, beating estimates for 8.2%, as COVID-19 restrictions were eased in some overseas markets.

The company lost $100 million due to the likely disposal of inventory in its supply chain after it decided in early March to shutter restaurants in Russia and Ukraine.

It also paid out $27 million for staff salaries, leases and suppliers in the region.

McDonald's, one of the first major Western brands to enter Russia after the fall of the Soviet Union, previously said the closure of restaurants in the region would cost $50 million a month, including lost revenue and wages payments.

Total revenue increased 11% to $5.67 billion, beating expectations for $5.59 billion.

Excluding costs to support the company's business in Russia and Ukraine as well as other one-time expenses, McDonald's earned a profit of $2.28 per share, besting estimates of $2.17.

(Reporting by Hilary Russ in New York and Uday Sampath in Bengaluru; Editing by Anil D'Silva and Bernadette Baum)



 

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