McDonald’s profits were hurt last quarter thanks to $1.2 billion in costs from its closures in Russia and Ukraine./Photograph: Shutterstock.
McDonald’s U.S. sales rose 3.7% in the second quarter, the company said on Tuesday, as digital sales and price increases continued to drive much of its performance here and internationally.
Globally, same-store sales rose 9.7% in the quarter. And the Chicago-based fast-food giant said that digital sales represented nearly one-third of the system sales in its six biggest markets.
Yet there were some signs of concerns. Earnings per share (EPS) declined 46% to $1.60, due to $1.2 billion charges related to its closure of restaurants in Russia and Ukraine, as well as “inflationary pressures on labor and commodities” in its company-operated locations. Factoring out one-time events, however, EPS was $2.55, which beat investors’ expectations.
The company generated $5.7 million in revenue, which did not meet expectations. “The operating environment across the competitive landscape remains challenging,” CEO Chris Kempczinski said in a statement. “While we are planning for a wide range of scenarios, I am confident that our plans and people position McDonald’s to weather this environment better than others.”
Overall, McDonald’s sales have been outperforming many of its competitors, thanks to a combination of its digital focus—notably its MyMcDonald’s Rewards loyalty program—as well as its marketing.
Price increases have been helping, too. The company said that “strategic menu price increases” drove sales last quarter. McDonald’s franchisees have been raising prices more aggressively in recent quarters to maintain margins as their costs for food and labor have soared.
Yet the company said that value offerings also drove sales.
McDonald’s sales recovered quickly from the pandemic, thanks largely to its drive-thrus and those digital sales. It appears to be poised to benefit from an uncertain economic environment, when consumers shift spending toward cheaper items.
Investors seem to think so. Though McDonald’s stock is down 7% so far this year, that is better than the 18% decline for the S&P 500 and the more than 20% decline for the average restaurant stock.
McDonald’s did generate $271 million from its sale of the Dynamic Yield business to MasterCard earlier this year. The sale came just two years after the burger chain bought the tech company for $300 million. Dynamic Yield adds artificial intelligence to menu boards and other technologies, enabling suggestive selling.
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