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McDonald’s sales surge despite price increases

McDonald’s is crediting sharp menu price increases in beating first-quarter profits. It also says a new customer loyalty program may have helped.

Shares of the Chicago-based company rose nearly 2 percent. The news comes as the economy contracted by 1.4 percent. The Biden administration had earlier predicted it would grow by 1 percent in the first quarter. Economists say it is another indication that the President’s policies are damaging the nation’s economic outlook.

The news on the economy is hurting lower-income Americans the most.

Pinched by higher costs for gas, rent, and groceries, lower-income customers are starting to buy cheaper or fewer McDonald’s menu items in some areas, Chief Executive Officer Chris Kempczinski said in a call with investors.

Global sales rose 11.8 percent, above estimates for an 8.2 percent gain. Total revenue increased 11 percent to $5.67 billion, beating expectations for $5.59 billion.

In “certain parts of the business and in certain geographies, there is a little bit of a trade down that we’re seeing that we’re just keeping an eye on,” he said. “We need to make sure that we continue to have value be an important part of our proposition.”

Even so, the world’s largest burger chain saw little resistance to menu prices that were roughly 8 percent higher in the first quarter versus the prior year.

Most U.S. restaurant chains and locally-owned restaurants have raised prices to offset soaring costs for everything from worker salaries to beef and paper packaging.

McDonald’s commodity costs roughly doubled even since the previous quarter in the United States and Europe and are now as much as 14 percent higher for the year, Chief Financial Officer Kevin Ozan said.

McDonald’s is losing roughly $55 million a month to pay staff, landlords, and suppliers “for keeping the infrastructure going” for its restaurants in the Ukraine and Russia, Ozan said.

Excluding costs to support the company’s business in Russia and Ukraine as well as other one-time expenses, McDonald’s earned a profit of $2.28 per share, besting estimates of $2.17.

–Wire services