McDonald's profits miss estimates as increasing prices weigh on earnings
Key points:
- McDonald's said quarterly profits and revenue missed analysts' anticipations as more increased costs weighed on its earnings.
- Menu cost hikes enforced to fight growing food prices aided increased sales.
- For the entire year, digital sales exceeded $18 billion.
McDonald's on Thursday declared quarterly profits and revenue that missed analysts' anticipations as more increased costs weighed on its earnings.
It marks the fourth profits miss for the firm in eight quarters. Shares of McDonald's dropped about 2% in premarket trading.
Here's what the firm declared for the quarter completed Dec. 31 compared with what Wall Street was hoping, based on a survey of analysts by Refinitiv:
- Profits per share: $2.23 adjusted vs. $2.34 predicted
- Revenue: $6.01 billion vs. $6.03 billion predicted
The burger chain declared fourth-quarter net earnings of $1.64 billion, or $2.18 each share, up from $1.38 billion, or $1.84 per share, a year before. Excluding costs linked to the sale of McD Tech Labs to IBM and other things, McDonald's gained $2.23 per share, dropping short of the $2.34 each share predicted by analysts surveyed by Refinitiv.
Operating prices and expenses increased by 14% in the quarter. Those more increased prices include salary hikes by McDonald's and many of its franchisees to draw and retain workers in a challenging work market. The elements for menu staples like its Big Macs and McNuggets are also becoming more costly.
Net sales increased 13% to $6.01 billion, missing anticipations of $6.03 billion. The firm's same-store sales rose 12.3% from a year back and 10.8% on a two-year basis. Menu cost hikes that were enforced to fight increasing prices supported increased sales.
In McDonald's home market, same-store sales increased 7.5%, beating StreetAccount estimates of 6.9%. On a two-year basis, U.S. same-store sales rose 13.4%. In addition to more increased menu costs, the firm credited its increasing loyalty program and promotional menu things like the McRib for the market's powerful performance.