McDonald's beat expectations during its earnings call on Monday thanks to new store remodels and a successful value menu. / <a href=''>McDonald's</a> McDonald's beat expectations during its earnings call on Monday thanks to new store remodels and a successful value menu. / <a href=''>McDonald's</a>

McDonald’s Discount Menu and Store Remodels Are Working

McDonald’s Corp. may be hitting its stride. The company’s revamped stores, fresh beef burgers and premium sandwiches — along with its new $1, $2, $3 menu — is clicking more with Americans.

The burger chain reported global same-store sales that topped analysts’ projections in its latest quarter, indicating its new dollar menu and recent breakfast deals in the U.S. are working. The report sent the shares up the most in nine months on Monday.

Like others in the American fast-food industry, McDonald’s has been heavily pushing discounted fare to give it a boost in the U.S., where it has 14,000 locations. The company on Monday also cited strength in China, Italy, Germany and the U.K.

“They’re appealing to the value customer and appealing to the customer who also wants a slightly nicer atmosphere,” said BTIG analyst Peter Saleh. “McDonald’s is going to start taking back some market share.”

Same-store sales rose 5.5 percent in the first quarter, the company said in the statement. That compared with the 3.8 percent gain seen by analysts, according to Consensus Metrix. Domestically, they increased 2.9 percent, also exceeding projections. U.S. same-store sales have gained for the past three years.

McDonald’s shares climbed as much as 4.4 percent to $165.23 in New York, the biggest intraday rally since July. The stock had fallen 8 percent this year through Friday’s close.

Excluding some items, earnings amounted to $1.79 a share in the quarter, while analysts projected $1.67 on average. Revenue of $5.14 billion, surpassed estimates of $4.97 billion.

Remodeled Stores

Chief Executive Officer Steve Easterbrook is looking to new menu items and revamped restaurants to fuel gains at McDonald’s. The company has accelerated its so-called Experience of the Future remodels, which it says will be in most domestic locations by 2020. It’s also offering fresh, instead of frozen, beef in certain hamburgers.

McDonald’s has previously said it will invest $2.4 billion to help remodel stores in the U.S., and open new locations. McDonald’s is also spending capital to modernize its technology. Delivery is another big push to get its food into more customers’ homes. The service is being provided by UberEats.

In the company’s international lead segment that includes the U.K. and Canada, same-store sales rose 7.8 percent. They gained 4.7 percent in the high-growth unit that includes China and South Korea. Both segments topped estimates.

In China, where competition among restaurant chains is on the rise, McDonald’s has said it wants to almost double its outlets within five years.

—With assistance from Vivian Li (Bloomberg Global Data).


©2018 Bloomberg L.P.

This article was written by Leslie Patton from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].

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