McDonald’s falls after profits hit by labor and commodity costs

McDonald’s said pandemic restrictions caused dining room closures in the quarter, and the company was seeing “increased pressure on labor availability and supply chain management” . Some locations have switched to take-out or drive-thru only, and comparable Chinese sales have been negative due to Covid outbreaks there.

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Rising labor and commodity costs “more than offset” sales growth at company-owned stores in the United States, McDonald’s said in a filing. Shares slid 2% in early trading in New York. The stock gained 16% in the 12 months to Wednesday’s close, outpacing the S&P 500’s 13% advance.

Same-store sales — a key metric for measuring restaurant success — rose 12.3% in the fourth quarter, compared to analysts’ estimate of a 10.7% gain. By the same measure, the results also exceeded estimates for the US and international development markets, which include countries in Asia and Latin America.

The results extend a string of selling performances that beat Wall Street expectations. The Chicago-based company said results in the United States were boosted by “strategic menu price increases”, its loyalty program and promotions on items such as the McRib and Crispy Chicken Sandwich. Fewer Covid-related shutdowns in major European markets of France, the UK, Germany and Italy also supported results.

McDonald’s expects its operating margin in 2022 to be between 40% and 40%, up from 43.4% last year, excluding certain items. The burger chain plans to open more than 1,800 restaurants globally this year and expects capital expenditures in the range of $2.2 billion to $2.4 billion.

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