McDonald's gets profit boost from price rises and sales in Europe

Warning short-term inflationary pressures will persist this year
McDonald's gets profit boost from price rises and sales in Europe

McDonald's beat Wall Street estimates for quarterly profit on higher prices, even as it warned short-term inflationary pressures would persist in 2023.

Investors are watching bellwethers like McDonald's for any sign consumers are cutting spending. McDonald's benefited from higher menu prices, increased restaurant traffic and sales in the UK, Germany and France rose despite fears of a recession in Europe.

The Big Mac maker also expects its accelerated plan to build more new restaurants will boost business, contributing nearly 1.5% to its 2023 systemwide sales growth in constant currencies.

Like other fast-food chains, Chicago-based McDonald's raised prices of its burgers and fries last year to keep up with surging commodity and staff  costs and it forecast margin growth this year.

Chief executive Chris Kempczinski told investors those short-term inflationary pressures will persist in 2023.

Even so, traffic rose 5% for full-year 2022, McDonald's disclosed, as its meals remained less expensive than many competitors, drawing low-income consumers.

McDonald's fourth-quarter global same-store sales also beat estimates with a 12.6% rise, compared with the average analyst estimates. 

McDonald's also said it expect its 2023 operating margin to be about 45%, versus 40.4% in 2022.

In October, chief financial officer Ian Borden said the company was "gaining share right now among low-income consumers" in the US  because of McDonald's "affordability".

In the US, the company launched its Cactus Plant Flea Market Box — an adult version of its Happy Meal for kids — with core menu items including its Big Mac and Chicken McNuggets, helping it post better-than-expected US sales.


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