Rising menu prices have not yet pushed down demand for McDonald’s, which reported higher-than-expected sales in the third quarter.
Chicago burger giant said Wednesday that sales between July and September reached $ 6.2 billion, up 14%. That’s more than Wall Street’s $ 6 billion forecast, according to analysts surveyed by FactSet.
According to the company, US prices rose 6% year-on-year between July and September to cover rising wages and rising costs for commodities such as food and paper. Kevin Ozan, McDonald’s Chief Financial Officer, said in a conference call with investors that clients have gained momentum so far.
McDonald’s expects prices to rise 6% throughout the year, Ozan said. The company expects product costs to rise 3.5% to 4% for the full year, accelerating from the 2% rise seen in the first nine months of the year. It expects those higher costs to continue until the New Year.
“Certainly, pricing and cost pressures have been a bigger focus over the last few quarters than before,” said Ozan.
McDonald’s president and CEO Chris Kempczinski said McDonald’s US franchisees raised wages by 10% this year and corporate stores wages to attract workers in a tough labor market. Said that it raised 15%. This helped keep the company competitive, according to Kempchinkushi.
But he said labor shortages continued to shrink services. For example, some locations close earlier than usual and service hours are slower.
“I was hoping that the situation would improve a little faster than it materialized,” Kempchinsky said. “I think the environment will continue to be tough in the coming quarters.”
In the third quarter, sales of stores opened in at least a year increased by 12.7% worldwide, above pre-pandemic levels and relaxed coronavirus restrictions in most markets, so Wall Street expects It easily surpassed the 10% increase that was in place.
According to McDonald’s, 80% of US dining rooms are currently open, up from 70% in the second quarter. In Europe, order levels at counters and in-store kiosks have almost returned to pre-pandemic levels.
It helped offset the softness elsewhere. McDonald’s said comparable store sales in China declined due to the resurgence of COVID cases in some markets and the softening of the economy. To counter this, the company plans to open 650 stores in China this year and hopes to accelerate store openings.
In Australia, a stay-at-home order closed half of McDonald’s dining rooms during the quarter, but delivery orders reached record highs. Kempchinsky said delivery demand remains high even as the market reopens. The company hasn’t analyzed the percentage of delivery orders, but Kempchinkushi says it has increased by “billions” over the past few years.
“Delivery met the needs of our customers. I don’t think any of us are completely grateful a few years ago,” Kempchinsky said.
McDonald’s relies on distribution partners __ Uber Eats, DoorDash, and Grubhub__ to reduce prices, he said.
“The fact that we are the largest in the world and can drive traffic should be reflected in the rates we pay,” Kempchinsky said. “We need each other. I’m optimistic that we can get a good solution for it within a few months.”
The company did not disclose the amount currently paid for delivery.
McDonald’s also said it has partnered with IBM on an automated ordering system that is being tested at several drive-through locations in the United States. Under this agreement, IBM has acquired MCD Tech Labs, which employs approximately 100 people, has completed the development of its ordering system and plans to roll it out worldwide in the coming years.
According to Kempchinsky, automated ordering can improve speed and accuracy and testing is encouraged, but the company has introduced other languages and has done a lot of work of entering menus from 40,000 locations. I was facing.
“The work is beyond the scale of our core competencies,” he said.
McDonald’s net income increased 22% to $ 2.1 billion in the quarter. Adjusted earnings per share was $ 2.76, above analysts’ forecast of $ 2.46.
McDonald’s share price rose 2.7% to close at $ 242.73 on Wednesday
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McDonald’s sales surged 14% as virus regulations were relaxed
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