Oct 30 (Reuters) – McDonald’s ( MCD.N ) beat Wall Street estimates for quarterly results on Monday, driven by new releases, promotions and demand for affordable burgers and fries from diners struggling with ever-higher prices for food and essentials.
Shares opened 2% higher after the California-based burger giant flagged cash flow for franchisees, but the minimum wage for restaurant workers will rise to $20 an hour next year.
McDonald’s size and scale have helped keep its food relatively affordable even after last year’s industry-wide price hike, helping to counter inflation-hit consumers’ tendency to eat more at home.
The company rolled out its smaller, more affordable meal packs containing key menu items to other regions after testing markets like Germany.
“Consumers continue to be discriminating about what and where they spend…(but) in terms of customer acceptance…we haven’t really seen any change in pricing,” CEO Chris Kempczynski said in a post-earnings call. .
McDonald’s reported traffic growth among lower-income consumers, although industry-wide numbers declined, Kempczynski said.
Drawing on its history of menu enhancements, the company introduced the Cheesy Jalapeno Bacon Cal Pounder in July and brought fan favorite Spicy Chicken McNuggets back to the menu in September.
“Despite a lackluster response, we see a solid MCD structure in (2024),” Wells Fargo analyst Zachary Fadem wrote in a note.
McDonald’s said it would work some of the success of the California wage hike by raising prices but did not detail the full impact.
Global comparable sales rose 8.8% in the quarter ended Sept. 30, while analysts on average were expecting a 7.36% rise, according to LSEG data.
“The value, affordability and sustainability that the McDonald’s brand can bring to consumers” will drive further fuel sales momentum later this year, said Stephens analyst Joshua Long.
Adjusted earnings per share of $3.19 came in at $3.00 after easing the cost of items like vegetables and proteins. The company also raised its full-year margin expectations.
Reporting by Deborah Sophia in Bangalore; Editing by Sriraj Kallu
Our Standards: Thomson Reuters Trust Principles.