Burger sales in the UK, Australia and France helped McDonald’s produce a rise in quarterly comparable sales of 4.2 per cent, sending its shares higher in pre-market trading.
Sales at the restaurant chain’s overseas businesses outpaced the highly competitive US market, where they rose 2.4 per cent on a comparable basis.
Restaurant chains in the US have been competing for a bigger share of an over-crowded restaurant market by offering dollar menus, discounts on drinks and limited-time menu items as well as freshly prepared meals. Those have pressured profits, leading McDonald’s to modernise its US restaurants with touch-screen kiosks and fresh instead of frozen beef burgers, in a bid to justify higher prices.
Analysts say the company’s big overseas operations in Britain, Australia and France have all been modernised faster, and have long been aimed at a slightly higher price point and wealthier demographic than the American equivalent.
Higher prices did drive a 2.4 per cent rise in same-store sales at its US outlets open for more than a year, but that was the slowest growth in six quarters and short of a consensus forecast of 2.55 per cent, according to estimates. Overall revenue at the world’s biggest fast-food chain fell 7 per cent to $5.37 billion in the quarter, mostly because of the company’s strategy to sell more restaurants to franchisees to save overhead costs.
Modernisation
Total operating income also fell 21 per cent in the third quarter due to heavy investment in the US modernisation. Net income fell 13 per cent to $1.64 billion, or $2.10 per share in the quarter ended September 30th beating expectations of $1.99 per share. McDonald’s also said it would open a net 600 restaurants in 2018. Bernstein analyst Sara Senatore said US comparable sales in the quarter had defied her worst fears. “These results underscore the persistent strength of the McD model,” she said.
Steve Easterbrook, chief executive, said it was the 13th consecutive quarter the company had generated positive comparable sales, a metric that counts restaurants open at least 13 months and strips out foreign exchange. – Reuters
