Will McDonald's Raise Prices Again? "This Year's Cost Increase Twice That of Last Year"

[Asia Economy Reporter Yujin Cho] McDonald's posted disappointing results in the fourth quarter of last year as weak performance continued in the Chinese and Australian markets due to cost pressures from supply chain disruptions.

On the 27th (local time), McDonald's announced its fourth-quarter results for last year, reporting a net profit of $1.6 billion, a 19% increase compared to the same period last year.

On a per-share basis, earnings were $2.23, falling short of market expectations of $2.34.

During the same period, global same-store sales reached $6.01 billion, up 12.3% year-over-year, but slightly below the market forecast of $6.03 billion.

When announcing the fourth-quarter results, McDonald's stated that food and other material costs in the U.S. rose by 4% last year.

McDonald's said, "Due to recent inflation, prices of raw materials such as food and packaging have surged significantly, and especially this year, the rate of cost increase is expected to be twice that of last year."

Kevin Ozan, Chief Financial Officer (CFO), said, "(The cost increase) is clearly a pressure," adding that maintaining a balance between menu price increases and customer satisfaction is key.

Last year, McDonald's struggled with rising costs amid renewed COVID-19 outbreaks, strengthened social distancing measures limiting in-store dining, prolonged labor shortages, and supply chain delays.

In particular, sales growth significantly slowed in China, which is implementing a strict "Zero COVID" policy, and in Australia, where confirmed cases have recently surged.

Due to labor shortages, McDonald's reduced store operating hours in its largest single market, the U.S., by an average of 10% compared to pre-COVID-19 times, and closed 20% of seating capacity.

McDonald's added, "Some franchises are responding by limiting operating hours only at stores where COVID-19 cases are increasing and switching to takeout service."

However, European regions such as Italy, Germany, France, and the United Kingdom continued to show double-digit growth.

McDonald's management said that cost increases would not significantly impact profitability and announced plans to invest $2.2 billion to $2.4 billion this year to open more than 1,800 stores in total.