Mon, February 06, 2023

McDonald’s Surprised Analysts With its Results

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The world’s one of the most famous fast-food chains reported better-than-expected earnings as well as revenue, fueled by price hikes in the U.S. and strong international sales growth. However, the was in Ukraine and inflation affected numerous companies and McDonald’s is not an exception. As a result, the war in Ukraine and inflation in the company’s home market loomed large over its quarterly report.

The fast-food’s giant’s CEO Chris Kempczinski said that the conflict hasn’t affected consumer behavior across the rest of Europe yet. However, some low-income U.S. customers are shrinking their orders or buying cheaper items.

McDonald’s reported a first-quarter net income of $1.1 billion or $1.48 per share, down from $1.54 billion, or $2.05 per share, a year earlier. 

The fast-food giant spent $27 million to pay for leases, employee wages, and supplier costs in Russia and Ukraine. The company suspended operations in both countries after Russia invaded Ukraine. It reported an additional $100 million charge for inventory in its supply chain that will likely spoil because of the temporary closures of its restaurants in Russia and Ukraine. All in all, those costs dragged its earnings down by 13 cents per share.

McDonald’s also said it has reserved $500 million, or 67 cents per share. It reserved money for a potential settlement related to an international tax matter. However, the company did not share more details.

McDonald’s and main findings  

Excluding costs related to the tax settlement, its restaurants in Russia and Ukraine and other items, the company earned $2.28 per share, exceeding the $2.17 per share expected by analysts surveyed by Refinitiv.

As in the case of other restaurants, McDonald’s has been facing higher commodity and labor costs. The company and its franchisees raised prices in order to cope with challenges

Net sales jumped 11% to $5.67 billion, surpassing expectations of $5.59 billion. Global same-store sales rose 11.8% in the first quarter, thanks to strong growth in markets like the United Kingdom and France. 

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