Business & Financial

Global sales, U.S. spending serve McDonald’s results beat

FILE PHOTO: A sign for the U.S. fast food restaurant chain McDonald's is seen outside one of their restaurants in Sint-Pieters-Leeuw

FILE PHOTO: A sign for the U.S. fast food restaurant chain McDonald’s is seen outside one of their restaurants in Sint-Pieters-Leeuw, near Brussels, Belgium February 14, 2018. REUTERS/Yves Herman/File Photo

By Aishwarya Venugopal

(Reuters) – McDonald’s Corp blew past analysts’ forecasts for profit and sales on Monday, helped by strength in overseas markets and U.S. consumers on average spending more in its restaurants.

Shares in the world’s biggest fast food chain by revenue rose nearly 5 percent as global same-restaurant sales topped Wall Street forecasts, helped by strength in mature markets in the United Kingdom and Germany.

The stock was the top gainer on the Dow Jones Industrial Average.

The results underscore the success of Chief Executive Steve Easterbrook’s multi-year turnaround plan launched in 2015 to refresh McDonald’s menus, add more technology to stores and make outlets more welcoming for customers.

New changes also included adding more high-margin “gourmet” burgers which use fresher and more expensive ingredients and cost $6 or $7 a time, and new $1 to $3 value options.

McDonald’s and other fast food chains have been concentrating on drawing customers with cheap options as they battle for a bigger share of a pie that is not growing. Monday’s results, however, suggest that while that may be working, the average check value in its U.S. restaurants is rising.

“The value price menu does bring people in, but people tend to spend more … people still want a number of key McDonald’s items like the Quarter Pounder and the Big Mac,” Tigress Financial Partners analyst Ivan Feinseth.

“(They) are still the biggest sellers.”

Same-restaurant sales in its most profitable market, the United States, rose by 2.9 percent, topping analysts expectations of 2.7 percent, according to Thomson Reuters I/B/E/S.

Global sales at stores open at least 13 months rose 5.5 percent, easily topping an average estimate of 3.94 percent. International markets were led by Germany and the United Kingdom, where sales rose despite severe weather conditions.

“(This) shows the power of the brand … globally the numbers were outstanding,” Peter Saleh, an analyst with brokerage BTIG, said. “The results were very impressive, actually more impressive than we initially had anticipated.”

Excluding items, the company earned $1.79 per share, beating the estimate of $1.67. Revenue fell 9 percent compared to a year ago, as the company sold more McDonald’s-owned outlets to franchises to cut costs.

Net income rose to $1.38 billion, or $1.72 per share, from $1.21 billion, or $1.47 per share, a year earlier.

Shares of the company were down 7.9 percent this year, underperforming Dow U.S. Restaurants index, which is down just 0.7 percent.

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Saumyadeb Chakrabarty and Patrick Graham)

 

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