McDonald's topped Wall Street estimates
INTERNATIONAL – McDonald’s topped Wall Street estimates for same-restaurant sales on Tuesday as strong demand in international markets made up for a continued slow-down in the US in the face of stiff competition.
Shares of the company were up 4.3 percent at $173.80 (R2 500) in morning trading as the Dow component also beat forecast for its main indicator of profit and said sales in its big developed markets outside the US grew 5.4 percent.
Restaurant chains in the US have been competing for a bigger share of an over-crowded restaurant market by offering dollar menus, discounts on beverages and limited-time menu items as well as freshly prepared meals to diners.
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 modernized faster, and have long been aimed at a slightly higher price point and wealthier demographic than the American equivalent.
Global comparable store sales rose 4.2 percent, topping an average estimate of 3.72 percent.
“International Lead Markets, which are in later stages of remodelling, digital and menu modernisation efforts vs the US, continue to be a bright spot,” said Cowen analyst Andrew Charles.
Higher prices did drive a 2.4 percent 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 percent, according to Refinitiv estimates.
Overall revenue at the world’s biggest fast-food chain fell 7 percent to $5.37 billion in the quarter, mostly because of McDonalds’ strategy to sell more company-owned restaurants to franchisees to save overhead costs.
Total operating income also fell 21 percent in the third quarter due to heavy investment in the US modernisation. Net income fell 13 percent to $1.64 billion, or $2.10 per share in the quarter ended September 30 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.