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McDonald’s Q4 earnings miss estimates, but digital sales soar

McDonald’s (MCD) on Thursday reported fourth-quarter earnings results that missed Wall Street’s expectations, with a spike in COVID-19 cases worldwide, staffing shortages and soaring inflation weighing on its performance.

Here’s what the Golden Arches reported, compared to Wall Street estimates, according to a Bloomberg consensus estimate:

  • Revenue: $6.01 billion versus $6.02 billion expected

  • Adj. earnings per share (EPS): $2.23 versus $2.33 expected

  • U.S. same-store sales: 7.5% versus 6.58% expected

Global comparable sales increased 12.3% during the final quarter of 2021, boosted by a 7.5% jump in U.S. sales. Meanwhile, the company’s booming app-driven MyMcDonald’s Rewards program helped to drive digital sales of over $18 billion in 2021, or over 25% of total sales in McDonald’s top six markets.

The restaurant chain’s new growth strategy, including the three ‘D’s:’ digital, delivery and drive-thru, has boosted sales during the pandemic. The Golden Arches also cited customers shelling out on larger orders, even as soaring inflation puts upward pressure on prices.

For McDonald’s, the digital boom that lifted the fast-food industry during COVID-19 showed no signs of slowing down. 

The company says “strong menu and marketing promotions,” like the second comeback of the McRib and crispy chicken sandwich, helped to boost sales, in addition to its loyalty program which launched back in July and is now in more than 40 markets worldwide. 

McDonald’s continues to see success with its limited-time celebrity meals, including the Mariah Carey inspired Menu, Saweetie Meal, and “Famous Orders” from BTS and Travis Scott, among others, and just released new menu hack options that will go live within days.

Overseas the restaurant chain saw a similar performance with fewer restaurant closures associated with COVID-19. International operated markets segment, including France, the U.K., Italy and Germany, saw same-store sales growth of 16.8%, which were in line with Bloomberg estimates of 16.79%.

Meanwhile, for international developmental licensed markets including Latin America and Japan same-store sales increased by 14%, surpassing Bloomberg estimates of 8.81%, but were partly offset by negative comparable sales in China due to a resurgence in COVID-19 cases.

BITG analyst Peter Saleh, who recently maintained their “buy” rating on shares of McDonald’s and its price target of $295, anticipated double-digit global same-store sales of 11.2% this quarter, including mid-single-digit growth of 6.5% domestically with adoption of automation technology in focus, in addition to “wider McPlant test during the call.”

Meanwhile in an industry note from Cowen, who has an “outperform” rating on shares of McDonald’s and a price target of $275, digital adoption is in focus as it “helps drive operational simplicity amid industry staffing challenges.” The company also anticipates MyMcDonald’s Rewards loyalty to hit a new record.

“We believe McDonald’s is uniquely positioned in quick service to win on digital and loyalty given the brand’s scale presents a competitive advantage to dedicate the right amount of resources to this strategy. We expect more Famous Orders menu collaborations in 2022 to drive digital adoption given the operational simplicity of selling core menu items, particularly at full margin.”

While menu innovation may not be a near-term focus for the Golden Arches according to Cowen, noting that “it seems the McPlant generally lacks operator support.”

Shares of McDonald’s are down 2% in the pre-market from Wednesday’s close, but up 16 percent compared to a year ago. 

Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected]

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