McDonald’s hikes menu prices to offset rising operational costs
McDonald's announced increases in prices for some menu items saying customers are willing to pay higher prices.
Video Transcript
- All right. Let's get you up to speed with McDonald's, another big mover here. The company reported better than expected earnings, yet we're looking at the stock off just about 1 and 1/2 percent, the beat coming after McDonald's raises prices by about 10% in its previous quarter to combat those higher operating costs that we've been hearing about.
Now, to put the prices in perspective, we took a look at some of their most popular items. You have the Big Mac, fries, and the McChicken. So this is comparing to prices back in 2019, about three years ago. The Big Mac price is up 7%. Fries have jumped nearly 25%, the McChicken up nearly 28%.
Despite these price hikes, Dave, it looks like when you take a look at some of the traffic inside their stores, consumers are trading down to McDonald's and willing to spend there.
- Look, when I look at this report, I'm shocked at the investor reaction across the board. They do say their prices, to your point, up 10% on average from a year earlier. But dive inside these numbers. US visits up 26%. That's from prepandemic, from 2019 levels. They're up 30% from a year ago. And if you want one more thing, how about an operating margin of 45%? That was 40 a year ago. They have raised prices. Consumers continue to pay it. And we have seen in the past, McDonald's has proven to be recession resistant. I think it's a pretty stellar report.
- It is a stellar report. And also, when you look inside and see what is working for McDonald's, yes, they're able to raise prices. Yes, consumers are continuing to spend. But some of their initiatives-- we talked about the McRib. That clearly was a huge hit.
- You ever had it?
- McDonald's-- I've never had it. Have you?
- Oh, yeah.
- Do you like it?
- Many McRibs.
- How do you-- you got a McRib and not a Big Mac?
- I have had several McRibs in my life.
- Oh, OK.
- The texture bothers me now--
- Does it live up to the hype?
- --as a young kid-- the texture will freak you out.
- Yeah, yeah, yeah.
- And I can't do it anymore. But as a young kid, I loved it. Still never had a Big Mac, though.
- Yeah. That blows my mind. Their fries are my favorite. McDonald's fries are my favorite. But cer-- they're not yours?
- No. No, not close. Wendy's. But no, I actually wanted to mention, something in the report caught my eye. Difficult decisions coming when it comes to corporate staffing levels. Sounds like layoffs are ahead, although they are opening new stores in 2023. A lot to digest, like always, with McDonald's.
