Global sales jump 10%, earnings top estimates

McDonald’s (MCD) reported earnings and same-store sales that topped expectations before the market open on Tuesday.

The company reported U.S. same-store sales that rose 3.7% while international sales rose 9.7% during the most recent quarter.

Wall Street analysts had expected same-store sales would rise 2.9% during the quarter, according to data from Bloomberg. Global same-store sales had been expected to rise 9.1% in Q2.

Adjusted earnings per share hit $2.55 against expectations for earnings of $2.46. Revenue in Q2 totaled $5.72 billion against expectations for $5.83 billion.

In the U.S., sales were driven by menu price increases, as well as value offerings on the everyday menu and digital offerings. In the company’s top six markets this quarter, digital sales exceeded $6 billion representing one-third of total systemwide sales.

Shares of the company were up about 2% in early trade on Tuesday. Through Monday’s close, shares of the company have lost 6.6% this year against a 16% decline for the S&P 500.

McDonald’s international operated markets saw same-store sales jump 13.0% led by sales in France and Germany. In the earnings call with investors on Tuesday morning, executives raised concern around a decline in consumer sentiment in France, Germany and Spain with some areas down “at record levels.”

In international developmental license markets, McDonald’s saw strong sales led by Japan and Brazil. However, strong growth was offset by a decline in sales in China due to a resurgence of COVID-19 cases and government restrictions.

On a call with analysts, CEO Chris Kempczinski outlined the impact of macro-headwinds, including the war in Europe, 40-year high inflation, and rising interest rates on the brand and consumer sentiment.

Executives suggested that the impact of inflation is expected to continue into the end of the year, with menu prices currently up high single digits and a “little higher than” last quarter, when prices rose roughly 8 percent.

The impact of inflation also taking a toll on customers’ purchasing power with many looking for “affordable options.” Customers, specifically lower income, are trading down to value offerings and fewer combo meals, executives added.

Dollar Menu advertisements are seen outside a McDonald's restaurant in Venice, California, April 29, 2018. REUTERS/Lisa Baertlein — Dollar Menu advertisements are seen outside a McDonald’s restaurant in Venice, California, April 29, 2018. REUTERS/Lisa Baertlein

This quarter, McDonald’s incurred charges totaling $1.2 billion in the quarter related to the sale of its business in Russia and a gain of $271 million related to the company’s sale of its Dynamic Yield business.

In May, the company announced plans to sell its Russia business entirely to one of its local licensees there. In June, Russia locations re-opened rebranded as ‘Vkusno-i Tochka’ which translates to ‘Tasty-period.’

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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