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McDonald’s beats sales, profit estimates on boost from pricier menu

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(Reuters) -McDonald’s Corp beat quarterly comparable sales and profit estimates on Thursday, helped by higher menu prices and an increase in restaurant traffic from inflation-weary customers looking for value meals.

The company’s shares rose 2.7% to $263.58 in premarket trading.

Like other fast-food chains, McDonald’s has been forced to raise prices of its burgers and fries to keep up with surging commodity and labor costs, but its meals are still cheaper than eating out at dine-in restaurants keeping demand resilient even as consumer spending power gets crimped.

Visits to the burger chain’s U.S. restaurants increased 6.2% in September, outpacing traffic to the broader quick-service restaurant space which rose just 0.8%, according to data from Placer.ai, a location analytics firm.

Chipotle Mexican Grill Inc on Tuesday also beat quarterly sales and profit estimates as it passed on higher prices to customers.

McDonald’s global same-store sales increased 9.5% in the third quarter ended Sept. 30, compared with estimates for a 5.8% rise, according to IBES data from Refinitiv.

The Chicago-based chain reported profit of $2.68 per share, beating estimates of $2.58 but still 6% lower than the same quarter last year.

Comparable sales for McDonald’s in the United States, the company’s biggest market, rose 6.1% in the reported quarter helped by higher prices.

McDonald’s iconic Big Mac burger was selling for $5.15 in June, up from $4.93 a year earlier, according to the Economist magazine’s widely used index of prices.

Analysts have noted that an easing in gas prices also boosted third-quarter restaurant sales in the United States in general after a slowdown in June.

However, McDonald’s total revenue fell 5% to $5.87 billion, due to the impact of a stronger dollar, but still beat estimates of $5.69 billion.

Earnings of U.S.-based multinational companies are expected to take a hit in the third-quarter from the towering rally in the U.S. dollar.

McDonald’s net income fell 8% to $1.98 billion, or $2.68 per share.

(Reporting by Uday Sampath in Bengaluru and Hilary Russ in New York; Editing by Shounak Dasgupta, Kirsten Donovan)

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