Total revenues in the third quarter fell 5% to $5.8bn in part held back by restaurant closures in the Ukraine and Russia.
On a like for like basis revenue was up 9.5%, beating market expectations. In the US, growth of 6.1% was largely driven by menu price hikes. International Operated Markets saw growth of 8.5%, with territories where McDonald’s operates a licensing model up 16.7%. Sales for the total network (including franchisees and owned restaurants) were up 6%, and the Group highlighted that in its 6 major markets over a third of sales were made using a digital device.
Operating income was down 7% to $1.98bn. McDonald’s expects inflation related margin pressure to persist for several quarters to come.
McDonald’s raised its dividend for the quarter by 10% to $1.52 per share.
Excluding Russia, the Group expects full year underlying operating margins in the mid-40s, with over 1,300 net new openings giving network sales a boost of around 1.5% in 2022.
In pre-market trading the shares were up 5.5%.
Derren Nathan, Head of Equity Research at Hargreaves Lansdown
“Pain in the global economy doesn’t seem to be deterring hungry customers from tucking into their favourite big macs and quarter pounders at the golden arches. We saw at the half year that customers were happy to pay higher prices, but also that the value range was gaining momentum. These trends have fed through to further revenue growth both at home and abroad.
Margins are coming under some pressure, and debt could be a bit lower, but we take comfort that targeted free cash flow conversion of over 90% remains in-tact for the year. You’d be forgiven for thinking there wasn’t much room for further restaurant openings, but McDonald’s expects 1,300 net additions in 2022, which we make to be estate growth of about 3%. Its embracing digital and this gives it plenty of scope to deepen customer loyalty and engagement.”