McDonald’s Corp. missed revenue and profit expectations on Thursday, as higher costs and dismal 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 percent 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 nearly 3 percent 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.
“COVID-19 continued to result in varying levels of government restrictions on restaurant operating hours, limited dine-in capacity and, in some cases, dining room closures,” McDonald’s said.
Sales rise in Italy, Germany, France, the US and the UK boosted total revenue by 13 percent 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 percent compared to analysts’ estimate of a 6.8 percent rise, thanks to the launch of special menu items such as McRib, loyalty program-driven growth in digital sales and higher prices.
Global same-store sales jumped 12.3 percent, compared with Wall Street estimates of a 10.73 percent rise.