McDonald’s reported lower profits Tuesday after pulling out of Russia as it keeps a close eye on restaurant traffic amid rising consumer inflation.
The US restaurant chain posted higher comparable sales in most major markets except China, where Covid-19 restrictions impacted sales.
This included a strong performance in Europe, where the chain highlighted France and Germany as particularly resilient markets.
However, Chief Executive Chris Kemczinski cited polls showing weaker consumer sentiment as the source of the uneasiness.
“The headline is: Europe is doing very well,” Kempczinski told analysts in a conference call.
“What’s on our minds is consumer sentiment,” he said, adding that the company is considering how much to “engage” with value propositions in Europe.
“Because of this uncertainty around consumer sentiment, we need to plan for more scenarios,” he said.
McDonald’s reported profit of $1.2 billion, down 46 percent from the same period last year, on a three percent decline in sales to $5.7 billion.
Results were hurt by $1.2 billion in costs related to the abrupt sale of McDonald’s Russia business following the country’s invasion of Ukraine.
As a more affordable restaurant chain, McDonald’s may be positioned to attract sales from lower-income consumers.
However, the company is also facing cost pressures.
In the United States, McDonald’s expects inflation of about 12 to 14 percent for groceries and paper and just over 10 percent for labor in 2022, Chief Financial Officer Kevin Ozan said.
McDonald’s expects US inflation to weaken in the fourth quarter. Such an abatement of the pressure is not to be expected on the overseas markets.
“In general, on the inflation side, it’s going to hit a little harder than the US and a little longer than the US,” Ozan said.
McDonald’s shares fell 0.2 percent to $249.77 in early trade.
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