McDonald's profit hit by rising costs, pandemic curbs

Customers are seen at a McDonald's fast-food restaurant in Tokyo, Japan, Sep 26, 2017. REUTERS/Kim Kyung-Hoon
McDonald's Corp 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, while it also raised wages in the United States.

Shares fell 2% as sales in China contracted after some cities banned dining in restaurants to control fresh outbreaks ahead of the Winter Olympics. In Australia, sales growth remained muted compared to a year earlier.

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

Sales rise in Italy, Germany, France, the United States and the UK boosted total revenue by 13% to $6.01 billion in the three months ended Dec 31, but still the company missed market expectation of $6.03 billion, according to Refinitiv data.

Meanwhile, expenses for the burger chain that has more than 40,000 restaurants in over 100 countries have been rising. While McDonald's had raised prices in 2021, higher costs continue to weigh on profit as it was forced to increase wages to retain workers in the United States, its largest market.

On a per share basis, McDonald's earned $2.23, but missed analysts' average estimate of $2.34.

Its US 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, loyalty programme-driven growth in digital sales and higher prices.

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