McDonald’s on Thursday reported quarterly earnings and revenue that beat analysts’ expectations, as diners spend more at its U.S. restaurants even in what CEO Chris Kempczinski called “a challenging environment.”
Shares of the company initially rose more than 3% in premarket trading, but the stock lost some of those gains as executives raised new concerns about the current consumer environment. The shares were slightly higher in morning trading.
“I think probably it’s fair to say that … it’s certainly not improving, and it may be getting a little bit worse,” Kempczinski said on the company’s earnings conference call. “Our focus is on what we can control, and on that score, I feel very good about the balance of the year.”
Higher prices at the gas pump, caused by the U.S. war with Iran, are adding to the list of reasons for declining spending from low-income consumers.
“Clearly, when you have elevated gas prices, which is the core issue that I think we’re all seeing about in the press right now, gas prices, inflation on that, that is going to disproportionately impact low-income consumers,” Kempczinski said. “And so we expect the pressures there are going to continue.”
Other restaurant companies, from Domino’s Pizza to Chipotle Mexican Grill, have reported that sales softened in March after the conflict began. McDonald’s is hoping that its strong value offerings will help it steal more market share from rival restaurant chains, even as consumers broadly dine out less frequently.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $2.83 adjusted vs. $2.74 expected
- Revenue: $6.52 billion vs. $6.47 billion expected
McDonald’s reported first-quarter net income of $1.98 billion, or $2.78 per share, up from $1.87 billion, or $2.60 per share, a year earlier.
Excluding restructuring charges and other items, the chain earned $2.83 per share.
Net revenue rose 9% to $6.52 billion.
The company’s same-store sales increased 3.8% in the quarter, roughly in line with Wall Street consensus estimates of 3.7%, according to StreetAccount.
In McDonald’s home market, same-store sales climbed 3.9%, fueled by customers spending more when they visited.
While the fast-food giant has leaned into value to win over budget-conscious diners, it has also been trying to appeal to customers through marketing and innovation, usually at a slightly higher price point. Tie-in meals with “The Super Mario Galaxy Movie” and “KPop Demon Hunters” weren’t discounted. And its limited-time, supersized Big Arch burger, which launched in early March in the U.S., aimed to provide a premium burger option.
One area of McDonald’s U.S. business disappointed executives: its company-owned restaurants. Those locations, which account for less than 5% of its total U.S. footprint, have been seeing weaker margins, so McDonald’s is considering selling them to franchisees.
The company’s international operated markets segment also…
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