The company announced last month that it would temporarily close its restaurants in Russia due to the country’s invasion of Ukraine. It also closed restaurants in Ukraine. Those closures cost McDonald’s $127 million last quarter.
McDonald’s said in March it would continue to pay its 62,000 Russian employees despite the country’s shutdown. CEO Chris Kemczinski added during a call with analysts on Thursday that McDonald’s also supports Ukrainian employees: “In both countries we have continued to pay employees and have provided additional support.”
These labor costs, plus payments for rent and consumables, cost the company $27 million.
“Findings include … $100 million in inventory costs in the company’s supply chain, likely being disposed of because restaurants are temporarily closed,” the company said in a statement.
According to an investor document, there were 847 McDonald’s restaurants in Russia at the end of last year. Together with another 108 in Ukraine, they accounted for 9% of the company’s sales in 2021.
The closures hurt McDonald’s net income, which fell 28% in the three months ended March 31.
Elsewhere, McDonald’s sales grew.
Globally, revenue from restaurants open 13 months or more grew 11.8% in the quarter, driven by international locations. In the United States, sales fell 3.5%, thanks in part to higher prices. Last year, McDonald’s increased prices by about 6%.
Marketing of the company’s key menu items and growth of its digital business, thanks in part to its rewards program, also contributed to the growth in U.S. sales, McDonald’s said.