McDonald's warns of higher food inflation
McDonald's Corp (NYSE:MCD - News) said higher costs for beef, bread and other items cut into its quarterly margins and that inflation for the year would be worse than expected.
The inflation comments on Thursday sent shares of the world's largest restaurant company down 2 percent, even though strong sales helped McDonald's post a first-quarter profit that beat expectations. March sales at established restaurants also rose more than expected.
"The key question now will be how they are going to raise prices to try to offset some of these food costs," Edward Jones analyst Jack Russo said.
McDonald's said it now expects food costs to rise between 4 percent and 4.5 percent in the United States and Europe this year. In January, McDonald's said it expected its food costs to be 2 percent to 2.5 percent higher this year in the United States and up between 3.5 percent and 4.5 percent in Europe.
McDonald's has been outperforming most other U.S. restaurant chains and taking market share from smaller rivals amid a slow U.S. economic recovery.