McDonald’s Quarterly Report Reflects A Fall In Profits And Increase In Expenses


At a glance:

  • In premarket trading, shares of McDonald’s fell almost 2%.
  • In the quarter, operating costs and expenses rose by 14%.
  • In 2022, the company is planning to spend $2.2 billion to $2.4 billion on capital expenditures.

On 27 Jan 2021, McDonald’s shared their quarterly earnings and revenue report. The report stated that the company was unable to meet the analysts’ expectations, with higher costs affecting its profits. This latest report marks its fourth earnings miss for McDonalds’ in the last eight quarters. In premarket trading, shares of McDonald fell almost 2%.

Based on a survey of analysts by Refinitiv, McDonald reported for the quarter ended Dec. 31 as compared with Wall Street expectations was: Earnings per share: $2.23 adjusted vs. $2.34 expected, Revenue: $6.01 billion vs. $6.03 billion expected.

A year earlier, the company reported a net income of $1.64 billion, or $2.18 per share, up from $1.38 billion, or $1.84 per share for the fourth quarter. McDonald earned $2.23 per share excluding charges related to the sale of McD Tech Labs to IBM and other items. This made it fall short of the $2.34 per share expected by analysts surveyed by Refinitiv.

Increase in operating costs and expense

In the quarter, operating costs and expenses rose by 14%. An increase in wage hike by the company includes in those higher costs. Also, the wage hike by the company and its several franchises were done to attract and retain workers in a tough labor market. Another major expense that increase the cost was the increase in the prices of ingredients for menu staples like Big Macs and McNuggets.

Increase in same-store sales

Net sales rose 13% to $6.01 billion, not meeting the expectations of $6.03 billion. As compared to last year, McDonald’s same-store sales increased to 12.3% and 10.8% on a two-year basis. The increase in sales was reflected due to menu price hikes that were implemented to deal with rising costs.

Same-store sales rose to 7.5% topping Street Account estimates of 6.9% in McDonald’s home market. U.S. same-store hiked 13.4% on a two-year basis. For the market’s solid performance, McDonald incentivized its growing loyalty program and promotional menu items like the McRib along with higher menu prices.

2022 and ahead

McDonald performed strongly outside the U.S, however, there was some market which was impacted by COVID-19. Another positive aspect for McDonald’s was the digital sales surpassed $18 billion, accounting for about 16% of its global system-wide sales for the whole year.

In the year 2022, the company is planning to spend $2.2 billion to $2.4 billion on capital expenditures. The capital will be used in opening more than 1,400 net new restaurants. This will help the company to increase 1.5% of the company’s system-wide sales in 2022. It is said that rest 40% of the capital expenditure will be utilised in modernizing restaurants in the U.S. business

Also Read: Monster acquires CANarchy in a $330 million deal

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