10/31/2023: McDonald's Beat Expectations By Raising Prices
Slowing traffic was made up by price increases
McDonald’s reported 2023 Q3 earnings yesterday. Revenue was $6.69B vs. $6.58B expected. Adjusted EPS was $3.19 vs. $3 expected. Revenue rose 14% YoY. Same-store sales grew 8.8% YoY vs. 7.8% expected.
The company said U.S. same-store sales increased 8.1%, fueled by strategic price increases. It expects the pricing will be up 10% for 2023 but Q3 price was actually down slightly. The company said the U.S. store traffic fell in Q3, marking the first quarter this year that the metric dipped. Apparently, consumers making less than $45K visited less often. The CEO made the following statement:
We’re just going to need to continue to keep a close eye on that $45,000 and under consumer because of the pressure that they’re feeling there and make sure that we’re offering value, but hopefully the industry stays disciplined as well on pricing.
Inflation is squeezing people hard and many companies are raising prices to maintain their profitability. Dollar menu no longer exists these days. Netflix just raised its subscription price a couple of weeks ago. I just got two frozen tamales from Trader Joe’s for $4.29 this morning. I believe I was able to get two freshly cooked ones for that price not long ago. Time has changed. I wonder what’s next. People grow their own food in the backyard?