McDonald’s Beats Estimates on Fewer Restrictions, Price Hike

(Bloomberg) -- McDonald’s Corp. posted third-quarter sales that beat expectations as U.S. diners placed larger orders and absorbed higher menu prices, while international results were buoyed by fewer pandemic restrictions.

The fast-food chain on Wednesday reported comparable sales growth -- a closely watched gauge of performance for restaurants -- of 12.7% in the quarter ended Sept. 30. That’s above the nearly 10% estimate from analysts. Comparable sales also outpaced expectations in the U.S. and international markets, the Chicago-based company said.

The performance came despite a range of challenges for the restaurant chain, from “restrictions driven by new Covid variants to supply-chain pressures and labor shortages across industries,” Chief Executive Officer Chris Kempczinski said on a conference call. “I’m confident in our ability to meet whatever challenges may confront us.”

While the restaurant industry is struggling with rising wage and commodity costs on top of supply-chain shortages and delays, McDonald’s is faring well thanks to its takeout and delivery focus. A new chicken sandwich and loyalty program, along with menu price hikes, helped in McDonald’s home market, where the chain has more than 13,000 locations.

McDonald’s nudged up its forecast for system-wide sales growth to a high-teens percentage from mid-teens. The company also expects to open 1,500 stores this year, above the 1,300 previously predicted.

McDonald’s shares rose 3.1% at 9:50 a.m. in New York. They gained 10% this year through Tuesday’s close, short of the S&P 500’s 22% advance over the same period.

The company’s sales and margin results were strong, with international operated markets a particular standout, Wells Fargo analyst Jon Tower said in a note. “It’s hard to poke a hole in MCD’s financial results.”

Read more: McDonald’s climbs after quarterly results beat estimates

Still, Kempczinski acknowledged that a shortage of staff was slowing service times and lengthening lines at McDonald’s stores. Kempczinski said he had hoped the labor crunch would have eased more by now. In the meantime, restaurants are struggling to fill open positions -- dangling sign-on bonuses and $20 an hour pay in some cases.

The stubborn labor shortage in the U.S. has been called out as an obstacle recently by rivals such as Popeyes Louisiana Kitchen, Chipotle Mexican Grill Inc. and Domino’s Pizza Inc. 

McDonald’s said results were strong in Canada, France, Germany and particularly the U.K. This was driven in part by fewer restaurant closures with the easing of Covid-19 restrictions. The company added that Latin America and Japan were strong performers.

The company’s dine-in business -- and kiosk usage -- is returning now in Europe, where it’s a more important part of the business versus the U.S.

Covid-related restrictions continue to weigh on McDonald’s in some regions, however. Comparable-store sales declined in China due to a resurgence of the coronavirus, while Australia’s sales were muted because of restrictions to curb the virus’s spread. The pandemic has caused reduced store hours and closed dining rooms in some cases.

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