McDonald’s Corp.’s sales grew in its most recent quarter as it increased U.S. menu prices, but the closure of its 847 Russian restaurants has hurt the chain’s profit.
The Chicago-based burger chain reported net income of $1.1 billion for its quarter ended March 31, down 28% from last year’s period. The company said it incurred $127 million in costs in its first quarter related to the closure of its Russian market in response to the country’s invasion of Ukraine, with expenses coming from ongoing payment of staff salaries and unsold inventory.
Companies are beginning to tally up the impact of the Russian war this earnings season. Banks such as Credit Suisse Group AG have noted hundreds of millions of dollars in loan losses related to Russia, while cookie maker Mondelez International Inc. MDLZ 1.23% said the war had increased its costs for making and selling snacks.
McDonald’s MCD 1.93% said it temporarily closed its Russian restaurants in mid-March, while continuing to pay the 62,000 people the company employed there. The company owns and operates 84% of its restaurants in Russia, with the rest run by franchisees. It also owns 108 restaurants in Ukraine, which it closed at the end of February, the company said.
McDonald’s MCD 1.93% reported Thursday quarterly earnings of $2.28 a share, after adjusting for the closure of its Russian market and the potential settlement of an international tax matter, exceeding analysts’ expectations of $2.17 a share.
The chain’s total sales of $5.67 billion were higher than expectations.
Same-store sales globally grew 11.8% during the quarter, compared with last year’s period. U.S. comparable sales grew 3.5%, with menu price increases, the chain’s new loyalty program and core menu items including chicken and beef driving growth, the company said.
McDonald’s told investors in January that U.S. menu prices increased by roughly 6% last year annually because of rising labor, food, packaging and other costs.
Restaurants have steadily increased menu prices in response to rising costs, and investors are watching for signs of consumer pullback.
Chipotle Mexican Grill Inc. said Tuesday that it has boosted prices more than 4% at the end of its quarter ended March 31, and could increase them again to offset costs. Chief Financial Officer Jack Hartung said in an interview that consumer demand hadn’t slowed down despite inflation pinching consumers’ wallets.
Write to Heather Haddon at [email protected]
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