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

McDonald's sales soar on higher prices, newer menu items
McDonald's sales soar on higher prices, newer menu items   -   Copyright  Thomson Reuters 2021
By Reuters

By Aishwarya Venugopal and Hilary Russ

-Higher U.S. menu prices and celebrity-themed meals helped boost quarterly comparable sales at McDonald’s Corp, but the company struggled to keep restaurants open at full capacity due to labor shortages and COVID-19 outbreaks, it reported on Wednesday.

Stock in the world’s largest burger chain rose more than 3% to $244 a share, as U.S. same-store sales grew 9.6% in the third quarter ended Sept. 30, compared with estimates of 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.

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 that the problems are not “unsolvable.”

Seating areas in about 20% of McDonald’s American locations – roughly 3,000 restaurants – also remain closed because they are in regions with high rates of COVID-19.

Even so, more 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. Most restaurant chains, including Chipotle Mexican Grill Inc, 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, 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.

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.