A key question for the fast-food industry is how well it can handle the prospect of rising costs. So far, investors don’t have much reason to feel queasy.
A shortage of workers, coupled with stubbornly high jobless claims, is an important issue facing the U.S. economy as it emerges from the pandemic. It would seem to spell trouble for burger, pizza and chicken chains, which are in an industry characterized by high transaction counts and thin profit margins. Food inflation also is on the rise.
Second-quarter results, however, suggest the customers will still show up despite low staffing. McDonald’s reported that comparable sales in the U.S. rose nearly 15% from the 2019 quarter. KFC parent Yum Brands said the chain grew comparable sales by 19% over that same period.
Even restaurants that supposedly benefit from lockdown conditions are thriving in the reopening. Domino’s Pizza said second-quarter sales grew 3.5% from a year earlier in the U.S., when most restaurants were shut due to public-health orders.
As a result, earnings were stellar: McDonald’s earned $2.95 a share in the second quarter, up more than 40% from the same period in 2019. Other rivals posted similarly strong results.