2023-11-02 04:16:00
The fast-food chain is not experiencing the crisis. If the current situation highlights one thing, it is that its franchise offers an exceptional capacity to absorb inflation.
Despite significant price increases, third quarter turnover is up 14% compared to last year at the same time; operating profit increases by 16%, and profit per share by 18%.
The average price of a McDonald’s menu can clearly no longer be clarified as affordable compared to other fast food alternatives. This does not deter customers, particularly among younger cohorts.
The dynamic is also observed over the first nine months of the year, with turnover up 11% and operating profit up 30% compared to the previous period.
Be careful, however: the first part of the 2022 financial year was still penalized by the effects of the pandemic.
Further proof that the price increase strategy is working: like-for-like sales are up 8.8% this quarter, despite – according to management – a significant decline in attendance from the most modest households.
The long-term trend remains encouraging in all respects. Excluding the exceptional episode of the pandemic, McDonald’s has seen a series of quarters of growth and returned to its record turnover levels of seven years ago.
At the same time, margins experienced a very spectacular expansion – a scenario that few investors would have dared to bet on at the time. Why deprive yourself as long as customers are willing to pay?
McDonald’s proves the superiority of its model here. To quote Warren Buffett, it is primarily in terms of its pricing power that we evaluate the quality of a company. The fast food chain provides a brilliant demonstration of this here.
The stock has traded over the last ten years in a very well-defined “range” between x20 and x30 profits. At x25 profits, the current valuation therefore oscillates very precisely around this average.
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