High inflation is influencing the way people spend money, including their dining-out habits. Currently, fast-food chains like McDonald’s Corporation (NYSE: MCD) are the preferred choice for the majority of customers, since full-service restaurants have become more expensive. McDonald’s management this week warned of continued volatility in the macro environment this year and reiterated its growth strategy.
The company is following a multi-pronged strategy to stay resilient to the headwinds and further strengthen the brand, which includes an extensive reward program, marketing campaigns, and innovative strategies like Accelerating the Arches. The Illinois-based company’s impressive financial performance shows the initiatives are yielding the desired results. A major portion of the planned $2.3 billion capital spending this year is earmarked for store development.
Chipotle Mexican Grill: A few points to keep in mind if you have an eye on this restaurant chain
Meanwhile, investors were not impressed by the stronger-than-expected fourth-quarter results — which were published on Tuesday — due to the muted top-line growth. The stock dropped soon after the announcement and traded lower throughout the session, but still stayed above its long-term average. MCD had mostly traded sideways after peaking around two months ago. After the recent gains, the stock is trading at a premium now. But the company’s financial strength shows it would continue giving returns to shareholders in the foreseeable future. That, combined with the handsome dividends, makes the stock an attractive bet.
While the company looks well positioned to meet its growth goals, higher raw material and energy costs would be a drag on operating margins going forward. Also, there has been an increase in competition for its drive-thru platform, lately.
McDonald’s CEO Chris Kempczinski said, “while we expect short-term inflationary pressures to continue in 2023, we remain highly confident in Accelerating the Arches, which now includes a greater emphasis on new restaurant openings. The recently announced Accelerating the Organization initiative will complement this strategy to enable the McDonald’s System to be faster, more innovative, and more efficient. We’re proud of our continued strong performance, but we’re not satisfied.”
Earnings topped expectations every quarter in fiscal 2022. In the fourth quarter, the top line also came in above the consensus forecast. Ever since customers shifted to home delivery during the pandemic, sales have remained stable, while higher menu prices and strong demand continue to drive margin growth.
Adjusted net profit climbed to $2.59 per share in the December quarter while net sales edged down to $5.9 billion. There was double-digit growth in comparable store sales across all geographical segments. Sales at company-operated restaurants picked up sequentially, after dropping in the trailing quarters. Revenue from franchised restaurants rose to $3.65 billion, extending the recent uptrend.
Read management/analysts’ comments on quarterly reports
The management is planning to open more stores this year – as many as 1,900 units globally — at an accelerated pace and to further expand the MCD growth pillars. The stock opened Tuesday’s trading at $270.89 and lost more than 2% during the session. It is up 15% from the lows seen four months ago.
Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!
Key takeaways from Cintas’ (CTAS) third-quarter 2023 report
Cintas Corporation (NASDAQ: CTAS) has been growing its market share by diversifying into new areas and through acquisitions. The prudent business model, with a focus on recurring revenues, has helped
Here are a few points to keep in mind if you are considering Starbucks Corporation (SBUX)
Shares of Starbucks Corporation (NASDAQ: SBUX) stayed in green on Thursday. The stock has gained 10% over the past 12 months. The company delivered healthy results for its most recent
ANGO Earnings: AngioDynamics reports loss for Q3; revenue up 9%
AngioDynamics Inc. (NASDAQ: ANGO) on Thursday reported a wider loss for the third quarter when the medical device maker's revenues increased by 9%. The company also provided guidance for fiscal