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McDonald's sales soar on higher U.S. prices, newer menu items

Stock MarketsOct 27, 2021 01:01PM ET
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© Reuters. FILE PHOTO: McDonald's Crispy Chicken Sandwiches and fries are pictured in New York, U.S. March 30, 2021. REUTERS/Hilary Russ

By Aishwarya Venugopal and Hilary Russ

(Reuters) -Higher U.S. prices and celebrity-themed meals boosted quarterly comparable sales at McDonald's Corp (NYSE:MCD), though the company struggled to keep restaurants open at full capacity amid labor shortages and COVID-19 outbreaks, it reported on Wednesday.

U.S. same-store sales grew 9.6% in the third quarter ended Sept. 30, compared with estimates for 8.27%, according to Refinitiv IBES data.

Global comparable sales also jumped 12.7% in the quarter versus estimates of 10.31% as international markets slowly recovered from the pandemic.

Shares in the world's largest burger chain rose about 2.2% to $241.70 in late morning trading.

The U.S. labor shortage caused some locations to close early and lose speed of service, Chief Executive Chris Kempczinski said in an earnings call, adding problems were not "unsolvable."

McDonald's has had to push back some new restaurant openings into early 2022 in part because global supply-chain problems made it difficult to get kitchen and tech equipment. That caused new unit development in the United States and some international markets to be "down a little bit" from how many the company had expected to open this year, Kempczinski said.

Seating areas remained closed in about 20% of McDonald's American locations - roughly 3,000 restaurants - in regions with high rates of COVID-19.

Even so, some pandemic-related restrictions have eased, luring more customers into restaurants. McDonald's crispy chicken sandwich and latest celebrity partnership with rapper Saweetie also boosted sales.

The Chicago-based company has also raised U.S. prices about 6% versus 2020 to help cover rising commodity and labor costs. Higher prices, combined with larger order sizes, drove sales.

Most restaurant chains, including Chipotle Mexican Grill Inc (NYSE:CMG), are charging more on menus to protect their margins against higher costs for everything from payroll to beef and chicken.

McDonald's forecast current-quarter U.S. comparable sales to post low double-digit growth on a two-year basis.

The fast-food chain, which has been seeking to grow sales digitally, launched a new loyalty program in the United States that now has over 21 million members enrolled, while also doubling down on advertising.

Most of the company's international markets also returned to sales growth, especially the UK, Canada and Japan, as coronavirus-related restrictions eased, while Australia and China sales continued to be pressured by the resurgence of COVID-19 cases.

Kempczinski said IBM (NYSE:IBM) Corp will acquire McD Tech Labs, which was created after McDonald’s 2019 acquisition of Apprente, an artificial intelligence company working on automating drive-thru orders.

Net income rose 22% to $2.15 billion and the company earned $2.76 per share on an adjusted basis, beating estimates of $2.46 per share.

McDonald's sales soar on higher U.S. prices, newer menu items
 

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