UPDATE 1-McDonald's sales beat Street estimates on rising menu prices

The Reuters- McDonald's Corp beat Wall Street estimates for quarterly comparable sales on Tuesday, boosted by higher menu prices, increased restaurant traffic and gains in most major markets.

The burger chain's worldwide same-store sales increased 12.6% in the fourth quarter of December 31, compared to estimates for an 8.6% rise, according to IBES data from Refinitiv. Sales in the UK, Germany and France went up despite fears of a recession in Europe.

The earnings report comes as investors are watching for signs of a recession after record inflation last year. McDonald's could benefit if more people in the lower-income community switch from higher-priced restaurants, as it did in the third quarter.

In the earnings release, Chief Executive Officer Chris Kempczinski said that the company expects short-term inflationary pressures to continue in 2023. The company reported a profit of $2.59 per share, an increase of 19%.

Like other fast food chains, Chicago-based McDonald's raised prices of its burgers and fries last year to keep pace with rising commodity and labor costs.

Traffic increased by 5% for full year 2022, as McDonald's meals were less expensive than many competitors, drawing low-income consumers.

In October, Chief Financial Officer Ian Borden said the company was gaining a lot of market among low-income consumers in the United States because of McDonald's affordability. He didn't define low income, but the NPD Group defines annual household incomes of $75,000 or less as lower income. The company launched its Cactus Plant Flea Market Box, an adult version of its Happy Meal for kids, with core menu items including its Big Mac and Chicken McNuggets, helping it post better than expected U.S. sales.

Visits to McDonald's U.S. locations increased by 26% in the fourth quarter versus 2019 and were up nearly 30% compared to the previous year, according to location analytics firm Placer.ai. It is compared to a 0.6% decline for fast food in the fourth quarter over the previous year.

While McDonald's reputation as a value player helps in an environment where lower- to middle-income consumers are looking to stretch household budgets, the company is also driving visits through other means such as celebrity meals and other marketing partnerships, and improved drive-thru operations, said Placer.ai's head of analytical research, R.J. Hottovy.

Visits to some other fast-food chains started to fall last summer as they hiked menu prices, he said.

McDonald's U.S. comparable sales rose 10.3% in the quarter. Global revenue dropped by 1% to $5.93 billion because of the stronger U.S. dollar against foreign currencies. Revenue increased by 5% in the same currency.