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Spokane, Washington  Est. May 19, 1883

McDonald’s tops estimates on higher prices as U.S. visits dip

Signage is shown outside a McDonald's restaurant in the Times Square neighborhood of New York, on Oct. 24, 2022.   (Jeenah Moon/Bloomberg)
By Daniela Sirtori-Cortina Washington Post

 McDonald’s Corp. sales and profits beat expectations in the third quarter thanks to higher prices and movie-inspired ads, but US customer traffic dipped for the first time this year.

Comparable sales - which track restaurants open for at least 13 months - rose 8.8% in the period, surpassing the 7.8% average estimate of analysts polled by Bloomberg, according to financial results released on Monday. McDonald’s earnings, excluding some items, were $3.19 a share, also beating estimates.

In the US, higher prices resulted in bigger check sizes, McDonald’s said. Marketing campaigns, expanding delivery and digital channels and better-run restaurants also helped. However, Chief Executive Officer Chris Kempczinski said traffic to US locations fell slightly in the third quarter.

“One of the things that we saw industry-wide is that that low-income consumer, which we would say is $45,000 and under, was negative from an industry standpoint,” Kempczinski said during a call with analysts, adding that customer traffic remains up for the full year.

Global same-store sales increased at their slowest rate so far this year. This tracks with executives’ warning in July that the overall pace of growth would moderate as high inflation and interest rates take a toll on the economy.

Comparable sales in international markets, where the company directly owns restaurants, increased 8.3%, just missing the average estimate and decelerating from the prior year. Licensed foreign markets also expanded at a slower clip than the same period in 2022, though faster than analysts expected, as all regions posted strong results.

McDonald’s said restructuring costs hurt earnings by about 2 cents a share, or $26 million, before taxes. Earlier this year, the company announced a reorganization that included the dismissal of hundreds of employees as it sought to cut costs and accelerate decision-making.

The burger chain is still among the publicly traded restaurants best positioned to navigate a tougher economic backdrop, Robert W. Baird & Co. analyst David Tarantino wrote in a report following the results.

McDonald’s shares were little changed at 9:57 a.m. in New York trading Monday. Shares were down 3% this year through Oct. 27’s market close, while the S&P 500 index rose 7.2% for the same period.