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.

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