Big Mac makeover helps McDonald’s overcome slump

CHICAGO • A revamp of McDonald’s iconic Big Mac burger and more aggressive drink promotions are helping the restaurant giant overcome a broader slump in the fast-food industry.

The chain posted a surprisingly strong gain in same-store sales last quarter, with the measure growing 4 per cent globally. Analysts had estimated a 1.3 per cent rise. Earnings also topped projections.

The results suggest that Chief executive officer Steve Easterbrook got a payoff from efforts to overhaul the company’s menu. He rolled out different sizes of the Big Mac and offered $ 1 and $ 2 drink deals, a bid to attract customers in a cutthroat U.S. restaurant environment. A switch to all- day breakfast in the U. S. in 2015 also continues to fuel sales.

“U. S. sales showed a nice acceleration in the quarter,” said Michael Halen, an analyst at Bloomberg Intelligence. “They’ve made a lot of positive changes over the last two years, and all of these positive changes are starting to add up.”

The Big Mac strategy represents a case of getting playful with a well- known product and not irking customers in the process. PepsiCo Inc. wasn’t so fortunate when it reformulated Diet Pepsi in 2015, a move that led to a consumer backlash. And Coca- Cola’s launch of “New Coke” in 1985 is considered one of corporate America’s most legendary failures.

As part of its Big Mac promotion, McDonald’s offered the sandwich in three sizes: the traditional version, a larger Grand Mac and a smaller Mac Jr.

U. S. same-store sales rose 1.7 per cent last quarter, an unexpected gain. Analysts projected a 0.8 per cent drop. Earnings amounted to $1.47 a share in the period, handily beating the $1.34 estimate of analysts. The company also is looking to delivery services and more digital options to help attract diners. It hasn’t been easy. U. S. competitors are advertising steeply discounted food, along with new fare. Industry samestore sales fell 0.6 per cent in March, slipping for the fourth straight month, according to MillerPulse data.

Like many of its rivals, McDonald’s is still struggling to boost U. S. customer traffic, which fell in the first quarter. Menu prices were about 2 per cent higher than last year, which drove the sales increase.

McDonald’s performed well in overseas markets, which provide about twothirds of revenue. Samestore sales at its high-growth division rose 3.8 per cent, topping the 2.7 per cent estimate. That segment includes China, where the chain is opening new locations to better compete with Yum China Holdings Inc.’s KFC and Pizza Hut brands.

Its so-called international lead markets climbed 2.8 per cent by that measure, driven by strong results from the U. K. and Canada. New fare has attracted diners in the U. K., while the chain has been working to improve its customer service at Canadian locations.

McDonald’s total revenue was $ 5.68 billion last quarter, compared with the average projection of $ 5.53 billion. Some of the gain may have come at the expense of other restaurant chains, including Sonic Corp. and IHOP, Halen said.

“They could be stealing traffic,” he said. “There’s no doubt things are looking up for McDonald’s.”