McDonald’s surges on strong earnings, growth plans
NEW YORK: McDonald’s enjoyed a fat day on Wall Street after wowing investors with betterthan-expected earnings and progress in efforts to grow sales through delivery and other techoriented services.
Results in the key US market were boosted by a discounted soda promotion and the launch of premium sandwich offerings.
Sales also were strong in Britain, Canada, Germany and China.
Investors were impressed with the company’s progress ramping up mobile order and mobile pay at more restaurants, and with its expansion of a delivery service, which has been launched at 4,000 restaurants in the US and other markets.
“We’re building a better McDonald’s and more customers are noticing,” said chief executive Steve Easterbrook.
“Our relentless commitment to running great restaurants and keeping the customer at the centre of everything we do is generating broad-based strength and momentum across our entire business.” The fast-food chain saw its share price jump just under 5.0 per cent to close at US$159.07.
Net income for the quarter ending June 30 surged 28 per cent, a US$1.4 billion jump and easily topping analyst expectations.
However, revenues dipped three per cent to US$6.0 billion, partly due to the strong dollar and the refranchising of restaurants.
Sales rose 3.9 per cent in samestore US restaurants following a push to offer soft drinks in all sizes at just US$1, and the launch of ‘Signature Crafted’ sandwiches, which feature applewood smoked bacon, Dijon sauce and other premium ingredients.
Easterbrook, hired in 2015 to turn around the slumping business, said initiatives like the soda promotions are helpful in winning back customers who wrote off the chain.
Under Easterbrook, the company also has invested in restaurant beautification and higher pay for workers.
“It’s great just to have more customers visit your restaurant to actually notice the investments we’ve made,” he said on a conference call.
Neil Saunders, managing director of GlobalData Retail, praised the results as a sign the fast-food giant has become “more entrepreneurial and nimble” compared with a few years ago.
“Although the measures may seem piecemeal, they are now part of a wider strategy to deepen McDonald’s relevance to modern diners,” Saunders said.
“The company has rightly recognized that a one-dimensional fast-food offering will no longer deliver growth.
“It is stepping up its efforts in premium offerings, family dining occasions such as breakfast, quick snacking and coffee stops, and a host of other areas.
We believe that, as a whole, these things give McDonald’s plenty of firepower for future growth.” McDonald’s is on track to install mobile pay and ordering at 20,000 restaurants by the end of 2017, including 14,000 in the US, where curbside pickup is popular.
Delivery also offers a potential avenue for reaching new customers.
The program, unveiled in partnership with UberEats and other food delivery services, is boosting sales with college students, people watching live sporting events at home and some inner-city neighbourhoods.