McDonald’s US business regains its stride
McDonald’s Corp reported strong restaurant sales on Tuesday, as $1 sodas and build-yourown burgers helped it draw in more customers and beat back rivals in an intense battle for market share.
The world’s largest restaurant chain by revenue has been working to boost flagging traffic at its US restaurants, where it gets most of its profit, after customers defected to fastfood rivals and pricier fast-casual options like Chipotle Mexican Grill Inc.
In the past year, McDonald’s has introduced cook-to-order, fresh beef Quarter Pounders and new items with a variety of buns and sauces like the Signature Sriracha sandwich, along with mobile ordering and delivery.
“We served more customers, more often,” chief executive Steve Easterbrook said on a conference call to discuss third-quarter earnings. “The US business regained its stride.”
Some analysts on the call expressed concern that new efforts, including table service and made-to-order burgers, would mean longer wait times that would annoy diners, but executives said customer satisfaction was higher and any service issues would be quickly ironed out.
Global sales at restaurants open at least 13 months rose 6% for the quarter, posting the third straight quarterly traffic increase and beating the 4.5% gain expected by analysts polled by research firm Consensus Metrix.
Those sales rose a better-than-expected 4.1% in the United States, where traffic improved for the second quarter in a row after more than four straight years of declines. China, the UK and Canada also turned in strong performances.
“Given that the fast food and casual dining segments as a whole struggled over the third quarter, this is an encouraging set of results which suggests McDonald’s is gaining both market and customer share,” GlobalData Retail’s managing director Neil Saunders said.
Aggressive US promotions included $1 any-size soft drinks, $2 McCafe smoothies and espresso drinks and McPick 2 offers of two items for $5.
The changes, part of a turnaround plan under Easterbrook, came as McDonald’s catches up with Chipotle, Wendy’s Co and other chains that raised the bar for what consumers can expect from quickserve restaurants.
Every second counts in the fast-food business. Service times at McDonald’s drivethroughs, which account for 70% of US revenue, already lag those of some major rivals.
Excluding items, McDonald’s earned a profit of $1.76 per share, missing the average analyst estimate by a penny, according to Thomson Reuters I/B/E/S.
During the quarter, McDonald’s had higher taxes and expenses, but also had gains from selling its China and Hong Kong businesses.
Total revenue fell 10% to $5.75 billion, due to restaurant sales to franchisees and strategic partners.