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McDonald’s (MCD) Q2 2022 earnings beat estimates

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An indication is posted in front of a McDonald’s restaurant on April 28, 2022 in San Leandro, California.

Justin Sullivan | Getty Images

McDonald’s on Tuesday said each price hikes and value items fueled U.S. same-store sales growth, which was higher than expected during its second quarter.

Nevertheless, CEO Chris Kempczinski said the environment remains to be “difficult” as inflation and the war in Ukraine weighed on its quarterly results and consumer sentiment.

“We now face war in Europe, inflation is running at the very best levels in 40 years, rates of interest are rising to levels we have not seen in years. All of that is contributing to weak consumer sentiment all over the world and the opportunity of a worldwide recession,” Kempczinski told analysts on a conference call Tuesday morning.

Shares of the corporate were up nearly 2% in morning trading..

Here’s what the corporate reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $2.55 adjusted vs. $2.47 expected
  • Revenue: $5.72 billion vs. $5.81 billion expected

McDonald’s reported second-quarter net income of $1.19 billion, or $1.60 per share, down from $2.22 billion, or $2.95 per share, a yr earlier. The corporate reported a $1.2 billion charge related to the sale of its Russian business because of the war in Ukraine.

Excluding that charge, a French tax settlement and other items, the fast-food giant earned $2.55 per share.

Inflation dragged down the corporate’s earnings, despite price hikes. For the complete yr, McDonald’s is projecting 12% to 14% inflation for food and packaging within the U.S. and even higher levels in Europe. Executives said U.S. inflation topped that level within the second quarter and can likely surpass it within the third quarter before moderating within the fourth quarter.

Net sales fell 3% to $5.72 billion, hurt partly by the closure of McDonald’s Russian and Ukrainian restaurants.

Global same-store sales rose 9.7% within the quarter, fueled by strong international growth. Russian locations were excluded from the corporate’s same-store sales calculations, but Ukrainian restaurants were included.

U.S. same-store sales increased 3.7% within the quarter, topping StreetAccount estimates of two.8%. The corporate credited strategic price hikes and its value offerings for its strong performance. Last quarter, McDonald’s executives said some low-income consumers were trading all the way down to cheaper options in response to inflation, and the trend continued this quarter.

The corporate’s international developmental licensed markets division saw its same-store sales climb 16% within the quarter. Same-store sales shrank in China as the federal government reimposed Covid restrictions, but growth in Brazil and Japan greater than offset the market’s weak performance.

McDonald’s international operated markets segment reported same-store sales growth of 13%, fueled by strong demand in France and Germany. Executives said that the division’s restaurants stole traffic share from other fast-food chains. Nevertheless, Germany, Spain and France are seeing consumer sentiment fall, even to record lows in some cases, in response to executives.

Read the complete earnings report here.

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