McDon­ald’s boosts cus­tomer traf­fic in key mile­stone for CEO

The Hamilton Spectator - - BUSINESS - CRAIG GIAMMONA

McDon­ald’s Corp. is get­ting cus­tomers back into its restau­rants af­ter years of de­clin­ing traf­fic, helped by drink deals and more up­scale ham­burg­ers.

The com­pany saw an in­crease in U.S. din­ers last quar­ter — a key mile­stone that has proved elu­sive to chief ex­ec­u­tive of­fi­cer Steve Easter­brook — and posted same­store sales that hand­ily beat an­a­lysts’ es­ti­mates. The shares rose most in three months, hit­ting a record high.

The re­sults mark a vic­tory for the 49-year-old CEO, who has been work­ing to over­haul McDon­ald’s for the past two years. Even af­ter he man­aged to in­crease sales at the world’s largest restau­rant chain — helped by higher prices — it’s taken longer to get more peo­ple in the door.

“You can in­crease sales by rais­ing prices, but that’s not sus­tain­able,” said Michael Halen, an an­a­lyst at Bloomberg In­tel­li­gence. “This is good, strong sus­tain­able growth.”

The shares in­creased 25 per cent this year through Mon­day’s close.

As many of its fast-food com­peti­tors strug­gle, McDon­ald’s has boosted sales with cheaper drinks, all-day break­fast and higher-qual­ity chicken. The chain is also im­prov­ing kitchen equip­ment to make its food taste bet­ter. Same-store sales rose for the eighth-straight quar­ter, and its do­mes­tic gain of 3.9 per cent beat an­a­lysts’ es­ti­mate of 3.2 per cent.

Easter­brook, who took over in March 2015, also has con­tended with a record run of gro­cery de­fla­tion that has made restau­rants a tougher sell to many Amer­i­cans. Chains have had to work harder to com­pete with su­per­mar­kets, where eggs and other sta­ples are in­creas­ingly cheap.

“We’re build­ing a bet­ter McDon­ald’s and more cus­tomers are notic­ing,” Easter­brook said in a state­ment.

Sec­ond-quar­ter rev­enue amounted to $6.05 bil­lion, beat­ing the av­er­age an­a­lyst es­ti­mate of $5.96 bil­lion. Earn­ings rose to $1.70 a share, com­pared with a pro­jec­tion of about $1.62. Glob­ally, same­store sales gained 6.6 per cent, well ahead of the 4 per cent pre­dicted by an­a­lysts, ac­cord­ing to Con­sen­sus Metrix.

McDon­ald’s traf­fic had dropped do­mes­ti­cally for the past four years. While Oak Brook, Ill.based McDon­ald’s posted sur­pris­ingly strong sales in the first quar­ter, cus­tomer counts were still neg­a­tive.

In March, com­pany ex­ec­u­tives said McDon­ald’s had lost 500 mil­lion trans­ac­tions in its home mar­ket since 2012. Most of those cus­tomers de­fected to other tra­di­tional fast-food com­peti­tors, not fancier or fast-ca­sual chains like Chipo­tle Mex­i­can Grill Inc. and Pan­era Bread Co., ac­cord­ing to com­pany of­fi­cials.

McDon­ald’s sees de­liv­ery ser­vices and dig­i­tal or­der­ing op­tions as the key to at­tract­ing more din­ers. It hasn’t been easy. Amer­i­can com­peti­tors are ad­ver­tis­ing steeply dis­counted food and new fare. In re­sponse, Easter­brook has tried to over­haul the com­pany’s menu and added all-day break­fast in the U.S. in 2015.


McDon­ald’s shares have in­creased 25 per cent this year thanks to all-day break­fasts, kitchen up­grades, drink deals and up­scale menu of­fer­ings.

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