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McDonald’s profits rise as consumers seek value

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McDonald's scored broad-based sales growth as consumers sought value while contending with inflation./AFP
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Feb 01, 2023 - 10:46 AM

NEW YORK — McDonald’s reported Tuesday a jump in fourth-quarter profits following higher sales in most markets, scoring with consumers worried about inflation.

The fast-food giant notched 12.6 percent comparable sales growth globally in the quarter ending December 31.

With the exception of China, where Covid-19 restrictions continued to depress sales, major markets including the United States, Japan and Germany all enjoyed solid growth.

“Overall we’re still seeing the consumer is resilient and it plays to our strengths as a system in terms of being well positioned on value,” Chief Executive Chris Kempczinski said on a call with analysts.

But Kempczinski said the company must stay “judicious” in terms of passing on higher operating costs to consumers.

Profits during the quarter were $1.9 billion, up 16 percent on the year-ago period on a one percent dip in revenues to $5.9 billion.

Cost pressures remained especially sharp in Europe, where the company is still working through “peak” inflation, in contrast to the United States, where cost pressures on food and paper materials have abated somewhat, said Chief Financial Officer Ian Frederick Borden.

Borden said prices in the United States rose about 10 percent over the course of 2022.

To assist its partners, especially in Europe, McDonald’s plans $100 to $150 million in financial support in 2023 for franchisees, Borden said.

Back in its home market, McDonald’s plans to open about 400 restaurants in 2023, the first additions in the United states since 2014.

The new US restaurants are “a sign of the confidence we have” in the business, said Kempczinski, who added that the US business has been boosted by higher digital and delivery sales.

In all, McDonald’s plans 1,900 new stores globally, including about 900 new spots in China.

Shares of McDonald’s fell 2.0 percent to $265.54 in afternoon trading.

While McDonald’s results topped analyst estimates, Briefing.com said the chain’s “cautious commentary on macro-related pressures” likely dented investor enthusiasm.

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