McDonald's Corp beat Wall Street estimates for quarterly comparable sales on Tuesday, boosted by higher menu prices, increased restaurant traffic and gains in most major markets.
The burger chain's global same-store sales increased 12.6% in the fourth quarter ended Dec. 31, compared with estimates for an 8.6% rise, according to IBES data from Refinitiv. Sales in the UK, Germany and France rose despite fears of a recession in Europe.
The earnings report comes as investors watch for signs of a recession after record inflation last year. McDonald's could benefit if more lower-income customers switch over from higher-priced restaurants - as it did in the third quarter.
Chief Executive Officer Chris Kempczinski said in the earnings release that the company expects "short-term inflationary pressures to continue in 2023."
The company reported profit of $2.59 per share, an increase of 19%.
Like other fast-food chains, Chicago-based McDonald's raised prices of its burgers and fries last year to keep up with surging commodity and labor costs.
Even so, traffic rose 5% for full-year 2022 as McDonald's meals remained less expensive than many competitors, drawing low-income consumers.
In October, Chief Financial Officer Ian Borden said the company was "gaining share right now among low-income consumers" in the United States because of McDonald's "affordability."
He did not define "low income" but data provider the NPD Group defines annual household incomes of $75,000 or less as "lower income."
The company launched its Cactus Plant Flea Market Box - an adult version of its Happy Meal for kids - with core menu items including its Big Mac and Chicken McNuggets, helping it post better-than-expected U.S. sales.
Visits to McDonald's U.S. locations rose 26% in the fourth quarter versus 2019 and were up nearly 30% compared with the previous year, according to data from location analytics firm Placer.ai. That is compared to a 0.6% decline for fast food overall in the fourth quarter over the previous year.
"While McDonald's reputation as a value player helps in an environment where lower- to middle-income consumers are looking to stretch household budgets, the company is also driving visits through other means like celebrity meals and other marketing partnerships, its loyalty program, and improved drive-thru operations," said Placer.ai's head of analytical research, R.J. Hottovy.
Visits to some other fast-food chains started to fall last summer as they hiked menu prices, he said.
McDonald's U.S. comparable sales rose 10.3% in the quarter. Global revenue dropped 1% to $5.93 billion because of the impact of the stronger U.S. dollar against foreign currencies. In constant currencies, revenue rose 5%.
(Reporting by Hilary Russ in New York and Ananya Mariam Rajesh in Bengaluru Editing by Matthew Lewis)