McDonald’s finds inflationary happy place

A huge advertisement for a branch of fast-food giant McDonald's is seen on the outskirts of Berlin
A huge advertisement for a branch of fast-food giant McDonald's is seen on the outskirts of Berlin, Germany, April 22, 2016.

NEW YORK, Jan 31 (Reuters Breakingviews) - McDonald’s (MCD.N) is having a good time at the bottom of the price food chain. The Chicago-based burger purveyor on Tuesday said that same-store sales rose 12% year-over-year in the last three months of 2022. Overall revenue fell 1% thanks to currency swings, but operating income increased 8%. Even as consumers feel the pinch, the $198 billion company run by Chief Executive Chris Kempczinski has more pricing power than more expensive options – after all, diners don’t have many cheaper places to go than McDonald’s.

The cost of food at home rose 11.8% in 2022, outpacing the 8.3% rise in the price of food away from home, according to the Bureau of Labor Statistics. That has helped restaurants grow, but McDonald’s is particularly benefitting. Its sales growth outpaces peers like Darden Restaurants (DRI.N), owner of Olive Garden and LongHorn Steakhouse, which reported a 7.3% rise in same-restaurant sales in the quarter to Nov. 27. That’s despite McDonald’s touting the benefit of “strategic menu price increases” this quarter; the company previously said its U.S. prices should be up over 10% for the full year. How long this can continue probably depends on other options staying pricier – but for now, the nugget-maker has found its happy place. (By Amanda Gomez)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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