McDonald's profit hit by rising costs, pandemic curbs

Customers are seen at a McDonald's fast food restaurant in Tokyo
Customers are seen at a McDonald's fast food restaurant in Tokyo, Japan, September 26, 2017. REUTERS/Kim Kyung-Hoon/File Photo/File Photo

Jan 27 (Reuters) - McDonald's Corp (MCD.N) missed revenue and profit expectations on Thursday, as higher costs and tepid sales in its over 4,500 restaurants in Australia and China due to pandemic-led curbs ate into gains from growth in the United States in the fourth quarter.

Operating costs rose 14% to $3.61 billion as supply chain bottlenecks led the world's largest burger chain to spend more for ingredients such as chicken and beef, as well as packaging material.

U.S. food and paper costs rose 4% in 2021 - a level the company expects to roughly double in 2022, it said.

"A surge in COVID-19 cases and a return of restrictions in many of our markets are creating uncertainty around the world, exacerbating labor shortages and supply chain delays," Chief Executive Officer Chris Kempczinski said on an earnings call.

In the United States, the company's biggest market, about 20% of U.S. restaurants have shuttered their seating areas because of staff shortages or local COVID-19 outbreaks and about 1% of U.S. stores are operating with reduced hours.

Shares fell slightly after the market opened. On a per share basis, McDonald's earned $2.23, missing analysts' average estimate of $2.34.

Sales in China contracted after some cities banned dining in restaurants to control fresh pandemic outbreaks ahead of the February Winter Olympics. In Australia, sales growth remained muted compared to a year earlier.

However, the Chicago-based chain's U.S. same-store sales increased 7.5% compared to analysts' estimate of a 6.8% rise, thanks to the launch of special menu items such as McRib, celebrity promotions, loyalty program-driven growth in digital sales and menu price increases of about 6% in 2021.

Sales growth in Italy, Germany, France and the United Kingdom also helped boost global revenue by 13% to $6.01 billion in the three months ending Dec. 31, just shy of a market expectation of $6.03 billion, according to Refinitiv data.

Global same-store sales jumped 12.3%, compared with Wall Street estimates of a 10.73% rise.

Reporting by Hilary Russ in New York and Praveen Paramasivam in Bengaluru; Editing by Arun Koyyur, Nick Zieminski and Howard Goller

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Hilary Russ writes about global restaurant chains including McDonald's and Starbucks. She previously covered sports betting, as well as municipal bonds, public finance and infrastructure. Hilary previously worked at Law360 covering corporate bankruptcies, white collar crime and the U.S. Supreme Court. At The Cape Cod Times and City Limits, she covered local courts, general news and social and public policy issues. She is an avid bird watcher.