McDonald’s sales boosted by higher prices in the first quarter
McDonald’s reported higher-than-expected first-quarter sales as store traffic picked up despite higher prices.
Global same-store sales rose 12.6% compared to the January-March period last year, the Chicago-based hamburger giant said on Tuesday. That’s well above the 8.7% rise Wall Street had forecast, according to analysts polled by FactSet.
Good weather in January and easy year-on-year comparisons — when the coronavirus hit demand — helped boost sales. China, too, has seen a steady recovery after COVID restrictions were lifted, McDonald’s said.
Marketing campaigns such as a McSpicy chicken sandwich promotion with a streetwear brand in China and a Valentine’s Day meal promotion in the US with rappers Offset and Cardi B also boosted the chain’s performance.
CEO Chris Kempczinski said the company is starting to see resistance to price increases in many markets. For example, customers may not add fries to an order, and delivery orders have slowed as customers reconsider the additional cost.
“It’s a reminder that we have to remain very disciplined when it comes to pricing,” Kempczinski said on a conference call with investors on Tuesday. “The customer is certainly dealing with some of the stress and pressure.”
But McDonald’s also faces higher prices for food, paper and workers. Chief Financial Officer Ian Borden said inflation is on a downward trend in the US but remains high. In Europe, the company expects double-digit inflation for the remainder of this year.
“Europe is working through the eye of the storm,” he said.
McDonald’s hopes improvements to its menu this year will further boost store traffic. The company announced this month that U.S. restaurants will switch to softer buns, meltier cheese, and change their grill settings to make their burgers juicier. The changes have already been rolled out in 15 other markets, including Australia and Canada, where they have improved customer taste scores, the company said.
Revenue rose 4% in the first quarter to nearly $5.9 billion, also beating analysts’ forecast of $5.6 billion.
Despite the outsized results, McDonald’s laid off several hundred employees earlier this month to speed up innovation and decision-making. McDonald’s booked a $180 million restructuring fee — or 18 cents a share — in the first quarter to account for severance payments and the closure of some regional offices.
Excluding that one-time fee, McDonald’s earned $2.63 per share, up 30 cents from expectations.
McDonald’s shares fell less than 1% on Tuesday.