Barometer Businesses: Supply-Chain Issues Haven’t Halted Growth
GM, McDonald’s, Coke Top Wall Street Forecasts
Despite rising inflation and supply-chain snags, some of the nation’s largest consumer-facing companies are navigating the turbulence fairly well. Many are reporting third-quarter results this week which, so far, have topped Wall Street expectations, signaling more growth to come and giving investors a broad view into how both the US and global economy are faring.
Take General Motors (GM) for starters. The vehicle maker has been hit hard by semiconductor shortages and supply-chain delays, but was still able to beat Wall Street estimates. Component shortages did weigh on GM’s output, but strong pricing and robust SUV and truck sales have helped since these models typically have higher margins. General Motors expects strong pricing to remain in 2022.
Rising Prices, Bigger Orders Drive McDonald’s Growth
Meanwhile in the restaurant and dining sector, higher prices and larger orders are lifting sales at McDonald’s (MCD) despite rapidly rising labor and supplies costs. This year alone, wages have jumped 10% in stores in the US. McDonald’s is also paying more for food, paper, and restaurant supplies. As a result, the fast-food chain operator expects commodity costs to climb 3.5% to 4% this year. To offset the costs, McDonald’s plans to raise prices in the US by about 6% in 2021.
Price hikes and bigger orders drove McDonald’s growth in the third quarter. US same stores were up 14.6% when compared to pre-pandemic 2019. Consumers are placing more to-go orders and purchasing for bigger groups, which also boosted McDonald’s sales.
Coke Offsets Costs With Higher Prices
Even beverage company Coca-Cola (KO) is benefiting from rising prices. Coke recently increased the amount it charges for soft drinks, juices, and sports beverages to offset some of the costs associated with higher commodity prices and shipping costs. The company is also spending more on marketing and advertising to take advantage of pandemic reopenings at movie theaters, stadiums, and concert venues across the country. Net sales in Coke’s third quarter rose 16%, topping Wall Street’s forecasts.
Iconic bellwether businesses like GM, McDonald’s, and Coke are all grappling with a volatile operating environment, but they appear to be weathering the storm fairly well for the time being. Part of this is because they are passing costs along to consumers. So far, consumers have not pushed back yet, indicating that they are willing to spend more to get their Big Mac and can of Coke.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS21102801
All your finances.
All in one app.
App Store rating
