Big changes pay off in a big way for McDonald’s
Second-quarter sales, profits and foot traffic rise, beating estimates
Cheap sodas and a new line of fancy sandwiches helped McDonald’s boost second-quarter sales and profit as the fast-food company continues its momentum.
The strategy of catering both to most cost-conscious consumers with a $1 any-size soft-drink promotion while paying heed to those at the top end of the market with offerings such as a Maple Bacon Dijon sandwich with a buttermilk crispy chicken patty proved to be a winning formula.
Sales at McDonald’s U.S. restaurants open at least a year increased 3.9%, outpacing S&P Global Market Intelligence analyst estimates of 3.8%. Globally, same-store sales rose 6.6% as the company reported higher foot traffic in all areas of its business, including a strong performance in China.
Besides higher-quality food and value pricing, McDonald’s says it has been trying to work on ambiance as well.
“We’re providing an experience that’s more personal and less stressful,” McDonald’s CEO Steve Easterbrook said, explaining that the company’s focus “remains growing guest counts by serving more customers more often.”
In the U.S., the national promotion for cold beverages and the company’s new upscale “signature crafted” sandwiches generated significant interest during the second quarter, McDonald’s said. Other new sandwich options include Pico Guacamole and Sweet BBQ Bacon, and they come with buttermilk crispy chicken, a 100% beef quarter-pound patty or artisan grilled chicken.
The company’s stock rose 4.71% Tuesday to close at $159.07.
Altogether, second-quarter revenue fell 3.4% to $6 billion as the company continues to turn some stores into franchised locations. But net income increased 27.6% to $1.4 billion.
Revenue and profit slightly outpaced S&P Global Market Intelligence analyst expectations.
McDonald’s said its next phase of growth will come from investments in new services, including digital ordering and food delivery. The company has a budding relationship with ride-hailing app Uber to deliver food in certain markets and is rolling out touchscreen ordering to thousands of locations.
“We’ve always prided ourselves on continued improvement, and now we’re doing it at an even faster pace,” Easterbrook said. “We’re generating faster momentum.”
The cheap drinks and high-end sandwiches are helping McDonald’s, according to Neil Saunders, managing director of the insights firm GlobalData Retail.
“The company has rightly recognized that a one-dimensional fast-food offering will no longer deliver growth,” he said.