Financing

Loyal customers helped drive McDonald's sales last quarter

Same-store sales rose 4.3% in the U.S., thanks to marketing, operations and its growing loyalty program. But sales came thanks to higher prices rather than traffic. And the chain saw sales challenges in the Middle East.
McDonald's earnings
McDonald's same-store sales rose 4.3% in the U.S. last quarter. | Photo courtesy of McDonald's.

McDonald’s is apparently getting plenty of loyal customers, driving sales in the U.S. and other global markets. But war in the Middle East kept the company from meeting Wall Street targets.

The Chicago-based fast-food giant on Monday said its U.S. same-store sales rose 4.3% in the fourth quarter, and 3.4% worldwide. The company said that it generated strong domestic sales thanks to its promotions, restaurant operations and its focus on digital.

McDonald’s has enjoyed a long run of success in its biggest market. Same-store sales in the U.S. have increased in 26 of the past 27 quarters, with the only negative coming during the outset of the pandemic in 2020.

Yet the company generated sales last quarter from higher prices, rather than traffic growth. After coming out of the pandemic luring more customers to its restaurants, the fast-food giant has had two straight periods with negative traffic.

In particular, McDonald’s saw a benefit from its loyalty program, MyMcDonald’s Rewards, which grew by more than 45% last year. System sales last year to loyalty members were more than $20 billion for the full year, and $6 billion in the fourth quarter, across its 50 largest markets.

The company has 150 million active loyalty members worldwide.

 

Executives said that it lost customers making $45,000 or less per year, suggesting that lower grocery prices are giving them reason to stay home for dinner. “Eating at home has become more affordable,” CEO Chris Kempczinski told analysts on Monday. “That’s putting some pressure on the low-income consumer.”

McDonald’s also said that its same-store sales are expected to moderate this year, rising 3% to 4% in the U.S. and its more developed global markets. Sales started out the year slow, in part due to difficult comparisons and weather-related issues.

McDonald’s stock was down 3% in early morning trading on Monday.

Same-store sales in the chain’s International Operated Markets, or its more developed global markets, rose 4.4% last quarter, thanks to strong performance in the U.K., Germany and Canada, though same-store sales in France declined.

Comparable-store sales rose 0.7% in McDonald’s International Developmental Licensed Markets, where sales struggled due to the war in the Middle East. The company said sales wee positive in all markets outside of that region.

CEO Chris Kempczinski had acknowledged such problems in a system message last month, arguing that “misinformation” and the war were having a “meaningful business impact” in the Middle East and in other markets.

McDonald’s is hardly the only company dealing with it. Starbucks saw a steep dropoff in traffic from non-loyal customers in the U.S. and elsewhere in the aftermath of the Middle East crisis, with the company similarly blaming misinformation for the issue. An international Domino’s franchisee said same-store sales were weak in Malaysia, due to consumer reaction there to U.S. brands over Middle East policy.

McDonald’s said its quarterly revenue rose 8% in the fourth quarter to $6.4 billion. The sales results did not meet investor expectations for the quarter. Net income rose 7% to $2 billion, or $2.95 per share. That figure bested expectations, thanks in part to improved margins at company stores. 

UPDATE: This story has been updated to include information from the company’s earnings call.

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