McDonald’s Corp. reported second-quarter sales and profits that surpassed analysts’ projections but warned of slower growth later this year amid a challenging economic backdrop.
(Bloomberg) — McDonald’s Corp. reported second-quarter sales and profits that surpassed analysts’ projections but warned of slower growth later this year amid a challenging economic backdrop.
The key metric of comparable-store sales rose 11.7% in the quarter, besting the 9.4% average estimate compiled by Bloomberg. In the US, McDonald’s benefited from “strategic menu price increases” and an advance in guest counts. Earnings of $3.17 a share, excluding some items, also exceeded expectations.
Comparable sales in international markets also beat estimates, led by growth in the UK, Germany and China.
“While global macroeconomic challenges persist, we continue to invest in our growth,” Chief Executive Officer Chris Kempczinski said in a statement accompanying the company’s results.
Still, the company warned of tamer expansion later in 2023, in part as declining inflation rates translate into fewer price increases.
“Customer discretionary spending is limited and industry traffic is pressured,” Chief Financial Officer Ian Borden said on a call with analysts. “As inflation begins to normalize, later in the year, we expect top-line growth to moderate.”
The shares were up 1.7% at 9:41 a.m. in New York. McDonald’s shares had gained almost 11% in 2023 through Wednesday’s close, lagging behind the S&P 500 Index’s 19% advance.
McDonald’s results point to the appeal of the chain’s offerings during economic uncertainty, even as the company charges more for its burgers and fries. Its delivery service in the US also grew, even though it’s more expensive than in-person dining and customers at other chains have pulled back.
Lower-income consumers are still frequenting the chain even if the size of their orders is shrinking, Kempczinski said Thursday on the call. The burger purveyor is also gaining diners who are trading down from full-service or casual dining, he said.
In contrast with McDonald’s, fast-casual chain Chipotle Mexican Grill Inc. on Wednesday missed analysts’ estimates for same-store sales and revenue.
The Chicago-based burger chain on Thursday also touted “culturally relevant brand and marketing campaigns” as growth drivers. In June, a promotion including a purple shake celebrating the birthday of McDonald’s character Grimace took the internet by storm.
McDonald’s said restructuring costs hurt earnings by 2 cents a share, or $18 million, before taxes. The company earlier this year announced a revamp that included the dismissal of hundreds of employees in a bid to reduce costs and accelerate decision-making, while also cutting the pay packages of some corporate staff.
(Updates with shares in seventh paragraph. Adds executive comments throughout.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.