McDonald’s Sales Boosted by New Menu Offerings and Price Increases

McDonald's stock is down 0.58%. Corp. said that menu promotions and price increases helped boost its fourth-quarter sales in the U.S. However, the company cautioned that inflation will continue to pressure its business this year.

‍
The burger chain said that its global same-store sales were up 12.6% from the previous year in the three months ending December 31st. The company attributed the increase to price increases, to-go sales, and promotions such as the Cactus Plant Flea Market Box of food and figurines, which fans have dubbed "adult Happy Meals". In the US, same-store sales were up 10.3% thanks to these same factors. The company reported net income of $1.9 billion, up 16% from a year earlier. Adjusting for one-time items, earnings per share were $2.59, ahead of the $2.45 expected by analysts.

‍
Chris Kempczinski, McDonald's Chief Executive, stated that the company would focus on new restaurant openings to fuel growth. He went on to say that inflation is expected to continue in 2023, and that McDonald's aims to make its operations more efficient. Earlier this month, McDonald's announced that it plans to make "difficult" decisions about changes to its corporate staffing levels by April, as part of a broader strategic plan. According to McDonald's president and CEO Steve Easterbrook, the company expects to save money as part of the staffing assessment.

‍
McDonald's has announced that it plans to expand its business globally, including through additional locations and new types of restaurants. The chain is currently testing a to-go only restaurant outside Fort Worth, Texas, which provides no public seating and uses a conveyor belt to deliver food to customers who order ahead.
As the U.S. economy slows down, restaurant sales have not declined as much as some investors had feared. According to the Commerce Department, U.S. consumer spending at restaurants in December was down from November, but still up 12.1% from December 2021. This shows that people are still willing to spend money on dining out, even in a weaker economy.

‍
The Covid-19 Omicron variant caused a decrease in restaurant sales last winter, but recent consumer surveys show that diners are now less concerned about the health consequences of eating out. A relatively mild winter this year has also helped restaurants, executives said. McDonald's reported sales of $5.93 billion in its fourth quarter, exceeding analysts' expectations of $5.73 billion. Revenue was down 1% from a year earlier, but up 5% when accounting for the effects of currency fluctuations, the company said.

‍
During the quarter, McDonald's ran several promotions that analysts had expected to increase sales, including the so-called adult Happy Meals. Some U.S. franchisees sold out of the boxes with collectible figurines. McDonald's also brought back Halloween pails and the McRib sandwich in the U.S. during the quarter.
Chain franchisees have raised prices in response to the increased cost of food and labor. McDonald's told investors in October that its U.S. menu prices in the quarter ended Sept. 30 were up 10% on average from a year earlier. This is in line with other fast food chains who have also raised prices in order to offset the increased costs.
McDonald's stock has risen 5.8% over the past year.

‍
Some of McDonald's competitors have reported fourth-quarter estimates that beat analysts' expectations. Carrols Restaurant Group Inc., the largest U.S. Burger King franchisee, said fourth-quarter same-store sales at its burger restaurants were up 6.2% from a year earlier. This is good news for the burger industry as a whole, and it will be interesting to see how McDonald's responds in the coming quarters.

‍
Wendy's Co. said earlier this month that it expected U.S. same-store sales for the three months ended Jan. 1 to be up nearly 6% from a year earlier. This would represent a significant increase from the company's previous projections. Wendy's also projected revenue of $536.5 million for the quarter, ahead of the $518.3 million estimated by analysts polled by FactSet. These strong projections suggest that Wendy's is poised for a strong quarter of growth.