McDonald’s is strong at the end of 2021, but costs are rising Ding Profit

McDonald’s ended in 2021, and US customers are closing more and less restaurants in Europe due to coronavirus restrictions.

But rising food and labor costs have put pressure on profits, and the company expects that pressure to continue this year. According to analysts surveyed by FactSet, McDonald’s reports that adjusted price-earnings ratio is $ 2.23 per share, 11 cents below Wall Street’s expectations.

Existing store sales in Chicago or sales of restaurants that have been open for at least a year increased by 12.3 percent quarterly, Chicago burger giants said Thursday. This is better than Wall Street’s expected increase of 10.5 percent.

In the United States, same-store sales increased 7.5% as limited-time products like McRib and new options such as improved chicken sandwiches attracted customers despite rising menu prices. According to McDonald’s, US prices rose more than 6% in 2021.

The fast-growing US loyalty program also helps to attract customers. The company said that my McDonald’s Drewward, which went on sale nationwide in July, currently has 21 million active members.

Sales were up 13% to $ 6.01 billion, slightly below Wall Street’s expectations as coronavirus regulations in Australia and China put pressure on sales.

McDonald’s was plagued by rising prices and rising labor costs.

US costs of food and paper products rose 4% in 2021 and rose 3% internationally in 2021, said Kevin Ozan, Chief Financial Officer. These costs are expected to double globally in 2022, and inflation will be even more pronounced earlier this year, he said.

“I don’t think what we’ve gained in 2021 or earlier will be wiped out,” Ozan said in a conference call with investors Thursday. “But it will certainly put pressure on both margins and cash flow.”

Last year, McDonald’s raised the hourly wage of 36,000 American employees at a company-owned restaurant. The franchisee owns 93% of McDonald’s 40,000 restaurants worldwide, but thousands of stores are owned by McDonald’s.

The company announced in May that it would raise its average hourly wage by 10% to $ 13 per hour and by 2024 to $ 15 per hour. Entry-level workers currently earn at least $ 11 an hour.

Chris Kempczinski, McDonald’s President and Chief Executive Officer, said competitive wages helped keep McDonald’s restaurants open. At the US peak of the Omicron variant wave in mid-December, about 10% of restaurants were open for a limited time. It fell to 1 percent, Kempchinsky said.

McDonald’s also paid higher incentive compensation after the company exceeded its 2021 internal forecast.

McDonald’s share price hit a record high earlier this month after rising 20% ‚Äč‚Äčover the past year, but was almost flat on Thursday.

By Dee-Ann Durbin

Associated Press