McDonald’s exit from Russia is costing it a lot of money — and food.
The company announced last month that it would temporarily close its branches in Russia due to the invasion of Ukraine , and it has also closed restaurants in Ukraine. The closures represented a $127 million loss for McDonald’s in the previous quarter.
McDonald’s said in March that it would continue to pay its 62,000 employees in Russia, despite closing its operations in the country. CEO Chris Kempczinski added during a call with analysts on Thursday that McDonald’s is also supporting its employees in Ukraine: “In both countries, we have continued to pay employees and provide additional support.”
Those personnel expenses, plus payments for leases and supplies, cost the company $27 million.
The other $100 million is for food and other items that he will have to dispose of.
“Financial results include … $100 million of inventory costs in the company’s supply chain that will likely be eliminated due to restaurants being temporarily closed,” the company said in a statement.
The company will provide an update on its plans for the region at the end of the second quarter, Kempczinski said.
McDonald’s said it will likely have to get rid of unused inventory in Russia.
At the end of last year there were 847 McDonald’s restaurants in Russia, according to an investor filing. Along with 108 others in Ukraine, they accounted for 9% of the company’s revenue in 2021.
The closures hit McDonald’s net income, which fell 28% in the three months ending March 31.
Elsewhere, McDonald’s sales grew.
Worldwide, sales at restaurants open at least 13 months rose 11.8% in the quarter, driven by locations outside the United States. In the United States, sales rose 3.5%, thanks in part to higher prices.
In the first quarter, McDonald’s prices rose 8%.
“Consumers are definitely concerned about inflation,” Chief Financial Officer Kevin Ozan said during the call. “They are concerned about energy and gasoline prices.” But, he noted, the fact that groceries are also getting more expensive has been “probably a small benefit.” He added that “we’re keeping … a close eye on low-income consumers to make sure we’re still providing the right value.”
Last year, McDonald’s raised prices about 6%.
Advertising for its menu entrees, as well as the growth of its digital business, thanks in part to its rewards program , also contributed to US sales growth, McDonald’s said.
Melissa Galbraith is the World News reporter for Globe Live Media. She covers all the major events happening around the World. From Europe to Americas, from Asia to Antarctica, Melissa covers it all. Never miss another Major World Event by bookmarking her author page right here.