McDonald’s on Wednesday reported quarterly earnings and revenue that topped analysts’ estimates as menu price increases on Big Macs and McNuggets in the U.S. offset rising costs.
The fast-food giant’s menu prices are roughly 6% higher compared with a year ago, offsetting increased labor and commodity costs. Executives said that the company and its franchisees use a pricing advisory service to understand how much customers are willing to pay.
Outside the U.S., international sales bounced back, despite Covid-19 resurgences in some markets.
On the heels of the strong global performance, McDonald’s raised its forecast for systemwide sales growth for full-year 2021.
Shares of the company rose more than 2% in premarket trading.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.76 adjusted vs. $2.46 expected
- Revenue: $6.2 billion vs. $6.04 billion expected
The company reported fiscal third-quarter net income of $2.15 billion, or $2.86 per share, up from $1.76 billion, or $2.35 per share, a year earlier.
Excluding strategic gains, McDonald’s earned $2.76 cents per share, beating the $2.46 per share expected by analysts surveyed by Refinitiv.
Net sales rose 14% to $6.2 billion, topping expectations of $6.04 billion. Worldwide, same-store sales climbed 12.7% from a year ago and 10.2% on a two-year basis.
In McDonald’s home market, same-store sales increased by 9.6% from a year earlier, when the fast-food giant started to see demand bounce back. On a two-year basis, same-store sales are up 14.6%. The chain credited its new chicken sandwich, a famous orders promotion with rapper Saweetie and other menu and marketing promotions for its strong performance.
Since the launch of its U.S. loyalty program in early July, the company has enrolled more than 21 million members, with 15 million active users. For comparison, Chipotle Mexican Grill launched its loyalty program in 2019 and counted 24.5 million customers as members at the end of its latest quarter.
But McDonald’s also faced some challenges during the quarter. Executives said on the call that staffing shortages hit the chain this quarter. Some restaurants scaled back their late-night hours, and understaffed locations put pressure on the chain’s speed of service.
In October, the chain is seeing same-store sales growth in the low double-digits on a two-year basis. CFO Kevin Ozan said the company expects similar results for the rest of the fourth quarter.
McDonald’s recovery is outpacing that of many of its rivals, including Restaurant Brands International’s Burger King. On Monday, the burger chain reported its U.S. same-store sales shrank by 1.6% in the third quarter after the chain began transitioning away from paper coupons and value meals. Burger King’s global same-store sales climbed 7.9% after falling 7% a year earlier.
McDonald’s international operated markets segment saw its same-store sales rise 13.9% from a year ago, fueled by strong demand in the United Kingdom. The division also saw positive same-store sales in Canada, France and Germany as restrictions eased. However, Australia’s same-store sales were dampened by another round of lockdowns in some regions. On a two-year basis, the segment’s same-store sales climbed 8.9%.
The company’s international developmental licensed markets division reported 16.7% same-store sales growth. While China’s same-store sales shrank during the quarter due to spikes of Covid-19, Japan and Latin America reported strong sales. On a two-year basis, same-store sales rose 4.9%.
For the rest of fiscal 2021, McDonald’s is predicting systemwide sales growth in the high teens, excluding currency fluctuations. It previously forecast growth in the mid-to-high teens. The chain is also forecasting full-year commodity costs to rise 3.5% to 4%, with more pressure coming in the fourth quarter.
McDonald’s also announced that it has entered a strategic partnership with IBM to automate its drive-thru lanes. The deal includes handing over McD Tech Labs, which was previously known as Apprente. Financial terms were not disclosed.
