Global fast food giant McDonald’s on Tuesday reported better-than-expected earnings and revenue in the first quarter of 2023, with net income reaching $1.8 billion, up from $1.1 billion from the same period last year.
Adjusted earnings per share – a key metric of a company’s profitability – came in at $2.63, surpassing analysts’ expectations of $2.33. The company’s revenue exceeded estimates too. McDonald’s revenue totaled $5.9 billion between January and March, compared to market expectations of $5.59 billion, reported CNBC.
McDonald’s Q1 numbers are a significant development since the U.S. consumer confidence index fell to a nine-month low in April, as per Reuters. The Conference Board’s consumer index dropped to 101.3 from a revised 104.0 in March. While economists have noted concerns about a potential recession in the short term, McDonald’s has emerged victorious in driving footfall for a third consecutive quarter.
The fast food giant’s performance has been attributed to increased sales in the United States, where higher menu prices and higher traffic drove sales. McDonald’s U.S. traffic defied the industry trend of declining traffic amid rising menu prices. The company has historically performed well during economic uncertainties as consumers opt for affordable meals.
Dangers looming ahead
However, despite the strong results, McDonald’s executives need to exercise caution about the future economic outlook in the U.S. and Europe. The company has faced some challenges in certain markets, with customers pushing back against price increases and ordering slightly fewer menu items per order. Additionally, there have been tensions between McDonald’s management and U.S. franchisees over policy changes, including implementing the Performance and Customer Excellence system to evaluate franchisees’ restaurants.
Alongside the US, McDonald’s international markets also performed well, with better-than-expected sales in its internationally operated markets, including the United Kingdom, France, Germany, and Australia, which saw same-store sales growth of 8.5 percent. Its international developmental licensed markets, including China and Japan, exceeded expectations with same-store sales growth of 10.5 percent. The company noted that sales in China improved as the country ended its zero-Covid policy in December, leading to a steady recovery.
But the road ahead looks tough as the 12-month inflation expectations slipped to 6.2 percent from 6.3 percent in March, indicating rising concerns about inflation. These economic indicators highlight the potential challenges McDonald’s and other companies may face in the coming months.
