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McDonald’s hiked prices and started offering adult Happy Meals — and sales are soaring


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McDonald's Cactus collab happy mealMcDonald’s collaborated with streetwear brand Cactus Plant Flea Market to produce a limited run of ultra-nostalgic adult Happy Meals.

McDonald’s

  • McDonald’s reported double-digit sales growth for 2022, driven by a 5% increase in customer count.
  • The brand attributed the bump to a combination of higher menu prices and unique promotions, like adult Happy Meals.
  • Economic conditions going forward could continue the trend, as customers look for low-cost dining options.

When the going gets tough, more people are going to McDonald’s.

The Chicago-based fast food giant reported a 10.9% increase in same-store sales for 2022, powered by a blockbuster fourth-quarter increase of 12.6%.

Like many companies last year, McDonald’s raised prices and widened profit margins, but that didn’t deter customers. In fact, customer count grew by 5% over the year before.

“It is clear the company has a lot of traction,” analyst Neil Saunders, managing director of GlobalData, said in a note.

Saunders pointed to customers increasingly looking for lower-cost dining options, as well as those seeking an inexpensive treat amid rising inflation and economic uncertainty.

Prime examples in 2022 included the McRib farewell tour and McDonald’s collaboration with streetwear brand Cactus Plant Flea Market to produce a limited run of ultra-nostalgic adult Happy Meals in fall 2022.

“Customer excitement was palpable,” CEO Chris Kempczinski told investors on Tuesday, adding that the Cactus program produced the highest weekly digital sales the company has ever seen in the US.

The four-eyed toys and boxes proved so popular that some locations sold out in less than a day.

“We had a line outside our store the first day,” a McDonald’s worker in San Antonio told Insider at the time. “We were sold out [of boxes] by 6 p.m.”

The company plans to step up its pace of new restaurant openings in 2023, spending over $1 billion to open 1,900 stores around the world, Kempczinski said. Of those 1,900, more than 400 new stores are projected in the US and certain other markets such as Canada, UK, and parts of Europe.

On the call, Kempczinski told investors the chain is seeing some signs of a pullback in consumer spending. Customers are buying fewer items, the chain said. Specifically, Kempczinski said that low-income consumers are trading down for cheaper items – but are also coming back more frequently.

Still, Wall Street was impressed by McDonald’s performance, with veteran analyst Mark Kalinowski calling the quarter one of the best year-over-year performances in over a decade at the burger giant.

In a post-earnings note, Kalinowski, who regularly surveys franchisees, said the momentum continues in the new year.

“We believe January 2023 has been very strong for McDonald’s US same-store sales as well — likely up by low double digits,” he said, referring to a metric demonstrating a company’s financial health.

Read the original article on Business Insider