​McDonald's Profits Fall Despite Sales Growth: Inflation Takes a Bite

According to the company's latest financial results, McDonald's has reported a sharp decline in operating profit for its UK restaurants, with profits falling from £165 million in 2022 to just £11 million in 2023. Despite a significant £238 million increase in turnover, the fast food chain has struggled with several financial challenges.

The company attributes the profit drop primarily to a £48 million impairment related to investments and intangible assets. These costs, coupled with ongoing inflationary pressures, particularly in food, paper, and utilities, have weighed heavily on the company's financial performance.

McDonald's Restaurants Limited reported a total turnover of £1.8 billion for the year ending 31 December 2023. However, gross profit decreased slightly from £861 million in 2022 to £826 million in 2023. Profit after tax also saw a substantial decline, falling from £129.7 million to £35.5 million during the same period.

Despite these setbacks, McDonald's described its overall business performance as "satisfactory," noting the resilience of its operations in the face of rising costs. The company acknowledged the challenges presented by declining footfall in its high street locations but emphasised its investment in enhancing the customer experience, particularly in its drive-thru stores and delivery services. These investments are seen as key to mitigating risks posed by shifting consumer behaviour.

Notably, McDonald's is optimistic about future sales. The company reported that sales in 2024 are currently outperforming the same period in 2023. Additionally, McDonald's is pressing ahead with expansion plans, celebrating its 50th anniversary in the UK by announcing a £1 billion investment in opening 200 new restaurants across the UK and Ireland over the next four years. This expansion will include new restaurant formats, such as 'drive-to' sites, and a renewed focus on high street locations.