McDonald's (MCD 0.37%) reported another quarter of double-digit percentage revenue growth when it released fourth-quarter results last week. Helping propel that growth was McDonald's investments in its digital capabilities.
At the pandemic onset in February 2020, sales decreased for McDonald's as it was forced to close its restaurants to in-person dining for an extended period. With COVID-19 vaccinations and adjustments to operations, economies are reopening and sales are rebounding for the iconic restaurant chain. A big contributing factor was McDonald's ability to make those adjustments.
Image source: Getty Images.
The market seems to like what McDonald's had to report as traders boosted the stock price by roughly 3% the day after earnings were released.
Digital sales are a boon for McDonald's
In Q4 (ended Dec. 31), McDonald's reported overall revenue growth of 13%. Comparable restaurant sales, which exclude the effect from restaurant openings and closings in the 12 months, increased by 12.3%, highlighting that the bulk of rising sales at McDonald's was due to improving demand at existing locations.
McDonald's CEO Christopher Kempczinsky discussed how important digital sales have been to the company's results in the conference call that followed the Q4 earnings release:
"Our investments in technology and digital are paying off as our digital engine continues to make the customer experience more seamless and fuels growth in the process. Our top 6 markets saw more than 1/4 of their systemwide sales, or $18 billion, come from digital channels in 2021, a 60% increase over 2020."
A big part of that has undoubtedly been its partnerships with third-party food delivery aggregators. Establishing a presence with Uber and DoorDash created another robust channel where consumers could enjoy McDonald's menu items. The food delivery option has become especially vital with the outbreak of COVID-19.
Delivery is now available at 33,000 McDonald's restaurants in over 100 countries worldwide. Judging by the explosive revenue growth at these food delivery businesses, customer demand for the service is off the charts.
What this could mean for McDonald's shareholders
The importance of digital sales can go far beyond the tenure of the pandemic. The shortages of labor have been widely reported since the pandemic onset and may last long after it's over. Shifting demographics are shrinking the labor force, increasing competition for scarce workers. That's causing wages to go up, and even though McDonald's has raised wages, it is still finding it challenging to sufficiently staff restaurants.
Digital sales relieve pressure on staffing needs. A customer ordering online or in the app does not need a cashier or a drive-thru employee. The website and app become your cashier and offer several advantages and efficiencies. With digital sales in 2021 growing 60% from 2020, it's no surprise McDonald's reported earnings per share of $10.04, the highest annual total in the last decade.
If you are looking for a restaurant stock to add to your portfolio, it might be good time to consider McDonald's.
