15 minutes
NEW YORK: McDonald’s reported stronger-than-expected quarterly profits on Thursday (Oct 27) as executives pointed to signs it is drawing customers priced out of more expensive restaurants.
The fast-food chain, known for the Big Mac and its golden arches logo, scored a 9.5% jump in global comparable store sales as it benefited from higher guest counts and “strategic” price increases.
While McDonald’s has not seen significant trade down among its own consumers, the company is “benefiting from trade down” from more expensive restaurant categories, chief executive Chris Kempczinski said on a conference call with analysts.
Executives said the dynamics favor the brand.
“We actually think we’ve got pricing power right now,” a McDonald’s executive said on the conference call. “We’re gaining share among low-income consumers and that goes back to the fact that we are positioned as the leading brand in terms of value for money and affordability.”
Profits declined 8% to US$2 billion (RM9.4 billion) from the year-ago period, while revenue fell 5% to US$5.9 billion, reflecting the chain’s smaller footprint after the sale of McDonald’s Russia business earlier this year.
McDonald’s said it continued to face heavy cost pressures across its operations for food, paper and energy.
The company’s base economic scenario calls for a “mild to moderate” recession in the United States and one that is “potentially a little deeper and longer in Europe”.
“We’re going to continue to have inflation into 2023, both food and paper as well as labour, but we like our position relative to competitor in terms of where we stand,” Kempczinski said on a conference call.
In the US, McDonald’s raised prices 10% compared with the year-ago period, executives said on the call.
In Europe, the company plans to set up a programme to provide financial support to franchise companies struggling with economic conditions, especially spiking energy prices.
The programme will be akin to efforts set up early in Covid-19, when McDonald’s established US$1 billion in liquidity assistance to help franchisee companies facing financial stress. – AFP
