The stock market is neutral about McDonald’s prospects. Its shares have traded between $217.68 and $271.15 apiece in the past year, and the current price is near $248.
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The reason the price has not moved toward the top or bottom of the range is that sales are strong. They rose 11% in the last quarter to $5.7 billion. However, the bottom line eroded, with earnings down 28% to $1.1 billion.
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McDonald’s runs on beef, chicken, bread, coffee and soft drinks. It also relies on particularly low costs of labor. Much of the food it sells has been hit by inflation. The union movement that has bedeviled Starbucks and Amazon may drive labor costs higher.
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There is an increasing chance that inflation may be long-lived and could worsen. The Bank for International Settlements stated in its annual report that “The risk of stagflation looms over the global economy as the threat of a new inflation era coincides with a weaker outlook for growth and elevated financial vulnerabilities.”
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Note that people often turn to fast food when food prices are high. However, even for these people, inflation could start to price McDonald’s out of the market.
McDonald’s Faces Crippling Inflation
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
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