McDonald’s same-store sales climb as promotions lure customers

McDonald’s reported better-than-expected sales at its established restaurants during the third quarter, as its promotions along with fresh food offerings drew more customers.

Here’s what McDonald’s reported compared with what Wall Street was expecting, based on a Thomson Reuters survey of analysts:

  • Adjusted earnings per share of $1.76, compared which has a forecast profit of $1.77.
  • Revenue was $5.8 billion, versus an estimate of $5.7 billion.
  • Same-store sales inside the U.S. climbed 4.1 percent, better than the expected 3.6 percent growth.

McDonald’s shares were up 1.4 percent Tuesday morning.

“The U.S. comp number is actually definitely encouraging, along with the key thing is actually of which [This kind of is actually] even with the impact of hurricanes within the quarter,” Morningstar’s R.J. Hottovy told CNBC’s “Squawk Box.” “The fresh initiatives they put in place seem to be working.”

The chain’s national cold beverage value promotion, for example, offered fizzy drinks for $1, along with its fresh Signature Crafted sandwiches were priced at $5 to $7, each. McDonald’s McPick 2 deal, which lets customers buy two menu items for $5, was also seen boosting sales inside the latest period.

Last month, data tracker M Science warned of which the Illinois-based burger chain could have been hurt by Hurricanes Harvey along with Irma. The firm issued a sales forecast of which was weaker than various other Wall Street analysts at the time.

However, McDonald’s on Tuesday showed of which its promotions were able to offset some of those negative impacts.

“We are serving more customers, more often by offering great tasting food at a not bad value with the quick service along with friendly hospitality they expect coming from McDonald’s,” President along with Chief Executive Steve Easterbrook said in a statement.

“Our positive comparable sales along with guest counts across all of our operating segments during the third quarter demonstrate broad-based momentum throughout our business of which builds upon our strong first half of 2017,” Easterbrook added.

McDonald’s net income rose to $1.88 billion, or $2.32 per share, inside the third quarter, coming from $1.28 billion, or $1.50 per share, one year ago. Excluding one-time charges, McDonald’s earned $1.76 per share.

Sales at U.S. restaurants open at least 13 months rose 4.1 percent, while global comps were up 6 percent during the period.

Total revenue came in at $5.75 billion, down 10 percent coming from a year earlier due to charges related to a refranchising initiative, McDonald’s said.

During the latest quarter, McDonald’s finished refranchising its businesses in China along with Hong Kong, completing the switch at 4,000 restaurants “more than a year ahead of schedule,” according to Chief Financial Officer Kevin Ozan.

“Our more heavily franchised structure will continue to drive shareholder value by providing a more stable revenue along with income stream with higher returns on invested capital,” Ozan said in a statement.

Franchising cuts the cost of operating those stores while adding more predictable rent along with royalty payments for the business.

McDonald’s focus continues to be on menu innovation, store renovations, digital ordering along with delivery as of which works to achieve sustained growth along with attract more customers. One example of This kind of is actually McDonald’s growing its McDelivery program with Uber’s UberEATS.

“Improvements to restaurants are also helping to shift perceptions of McDonald’s,” GlobalData Retail Managing Director Neil Saunders wrote in a note to clients.

“Refurbished locations project a modern image along with are also spaces of which help attract fresh diners, especially family segments along with younger age groups,” Saunders said. “Better displays of products like snacks along with treats have also boosted sales in categories where McDonald’s has traditionally been lackluster.”

By the end of 2020, Saunders said, most of McDonald’s restaurants will have been “enhanced” with technology upgrades. along with This kind of should drive U.S. same-store sales even higher, according to Hottovy.

McDonald’s is actually inside the midst of adding more kiosks to its stores along with launching mobile order along with pay.

As of Monday’s close, McDonald’s shares are up more than 34 percent in 2017.

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