McDonald’s may be looking at further price increases in the coming months, treading carefully among persisting supply and inflation issues.
Second quarter results show strong sales, both domestic and foreign, with a 9.7% increase in global comparable stores, most of which came out of the International Developmental Licensed Markets with a 16% rise in sales.
“Our second quarter performance reflects outstanding execution against our Accelerating the Arches strategy. By focusing on our customers and crew, enabled by a rapidly growing digital capability, we delivered global comparable sales growth of nearly 10%. Nonetheless, the operating environment across the competitive landscape remains challenging. While we are planning for a wide range of scenarios, I am confident that our plans and people position McDonald’s to weather this environment better than others.”, said McDonald’s President and Chief Executive Officer, Chris Kempczinski.
However, the company’s consolidated revenue decreased in the quarter, dropping by 3%. This likely has something to do with increased costs for ingredients and store closures in Russia. As is the story with many food businesses today, sales increases are still there, but costs continue to rise even higher, which then eat at those sales. This is why a price increase is likely ahead. Supply chain issues are not likely to ease up and inflationary pressure seems to be more than the transitory presence the Fed thought it would be.
Price increases totaled 8% in the first quarter of this year. Any further increases are likely to be small and incremental, but they will come. Success in this country, “was driven by strategic menu price increases and value offerings across both our everyday menu and digital offerings.”, according to the company’s second quarter press release. The incentive to continue increasing is too firmly there.
We will have to wait until the end of the year to see how future events have affected McDonald’s performance. As was stated in an earlier article on Chipotle, certain forces are conspiring to cause trouble in the coming months. A substantial energy shortage may hurt Europe with the onset of the colder months, possibly affecting heating costs both here and abroad. And further supply shortages are likely to continue. Such things have been affecting McDonald’s for a few years now, but the company was able to adapt perfectly as pressure mounted. That said, Q3 and Q4 results should reflect a business that continues growth and higher sales.