McDonald’s (NYSE:MCD) has announced that its revenue growth is likely to moderate in the second half of the year, citing signs of easing inflation as the reason behind the decision to temper menu prices. Despite this projection, McDonald’s stock rose by 1.5% during morning trading, following the release of better-than-expected quarterly profit and sales figures, which showcased McDonald’s continued ability to attract consumers to its outlets.
Chief Financial Officer Ian Borden stated during a post-earnings call that, as inflation starts to subside, the company anticipates a reduction in pricing levels. This move comes in response to the need to offset higher labor and commodity costs, including beef and dairy, which had led major U.S. restaurants to raise prices in recent months, bolstering their revenue.
However, with ingredient costs, such as chicken, cheese, and pork, now showing signs of easing, restaurants are hitting the pause button on further price hikes. Chipotle Mexican Grill (NYSE:CMG), for example, missed quarterly sales estimates as the benefits of previous pricing adjustments began to wane.
M Science Senior Research analyst Matthew Goodman explained that as ingredient costs decrease, restaurants can afford to be less aggressive with their pricing strategies while still maintaining margins.
McDonald’s CEO Chris Kempczinski noted that consumer sentiment in the United States was improving. He acknowledged that some consumers were choosing cheaper items or reducing order sizes, but overall, foot traffic remained strong.
To continue attracting customers, McDonald’s has employed various promotional deals and new launches at its more than 13,000 U.S. outlets. One successful limited-time launch was the Grimace Birthday Meal, featuring purple milkshakes, introduced in honor of the Grimace character from McDonald’s ads.
These promotions, combined with improved staffing levels, contributed to an impressive 11.7% surge in McDonald’s global comparable sales during the second quarter, surpassing estimates of an 8.88% increase, as reported by Refinitiv IBES data.
Excluding items, McDonald’s earned $3.17 per share, exceeding estimates of $2.79.
The second-quarter U.S. comparable sales climbed by a higher-than-expected 10.3%, while internationally operated markets also outperformed estimates with 11.9% growth.
McDonald’s international developmental licensed markets segment, which includes countries like China and Brazil, also posted a better-than-expected 14% increase in sales.
Featured Image: Unsplash @ Roman Lopez
Author Faith Yakubu 
