McDonald’s US Growth Beats as Value Draws Strapped Diners

Описание: McDonald’s Corp. reported faster-than-expected US sales growth last quarter as diners prioritized cheap fast food and pulled back from more premium meals at fast-casual chains.
US comparable-store sales, which reflect the results of established locations, increased 2.4% in the third quarter, higher than the average of analyst estimates, with the company attributing the rise mostly to higher per-visit spending. 
Overall comparable sales, which adds in international markets, were in line with expectations, while adjusted earnings per share fell short of the average of estimates compiled by Bloomberg. 
McDonald’s has sought to restore its reputation as a top destination for affordable meals with new deals and promotions. That’s included cutting some prices in August and offering a “buy one, add one for $1” option for items such as sausage biscuits and double cheeseburgers. The efforts are sparking diner demand and carrying into the current period, according to Chief Financial Officer Ian Borden.
“In the US, we actually expect our comp sales growth will accelerate in the fourth quarter versus the 2.4% that we delivered in the third quarter,” Borden said on the company’s call with analysts. He cited the popularity of the company’s value menu and the launch of a Monopoly promotion. 
Results in last year’s fourth quarter were also negatively impacted by an E. coli outbreak, giving McDonald’s an easier comparison period. 
Shares gained as much as 3.7% in New York trading on Wednesday, the most intraday in three months. The stock had gained 3.2% so far this year through Tuesday, below the S&P 500 Index’s advance of 15% over the same period.
International markets will likely slow from the third quarter due to strong performances last year, Borden said.
Fast-food restaurants are holding up better than than fast-casual chains such as Cava Group Inc. and Chipotle Mexican Grill Inc. Both chains cut their sales targets as middle-income and younger consumers cut back on the bowls, burritos and salads that fueled the growth of a cohort of restaurants that promised better ingredients at a slightly higher price point.

Allspring Global Investments Senior Portfolio Analyst joined Emily Graffeo and Katie Greifeld on 'Bloomberg Businessweek Daily' to break it down.


“The consumer slowdown is really affecting our business in a meaningful way,” Chipotle Chief Executive Officer Scott Boatwright said in a call with analysts last week, adding that customers in their late 20s and early 30s are “particularly challenged” due to unemployment, student loan debt and slower wage growth.
Cava said the government shutdown is impacting its Washington, DC locations as government workers miss out on paychecks.
Those same factors aren’t affecting quick service as major brands prioritize promotions. Both Restaurant Brands International Inc., which owns Burger King, and Taco Bell parent Yum! Brands Inc. have reported comparable sales that topped expectations. 
McDonald’s value offerings are increasingly appealing to more affluent consumers, Chief Executive Officer Chris Kempczinski said on the call. Foot traffic to fast food restaurants among wealthier diners in the US rose double-digits, while visits from those with lower income fell by a similar amount, he said. 
That trend is seen persisting amid higher food, rent and childcare costs, coupled with reductions in government food assistance programs. “So long as that consumer cohort is feeling like real incomes are under pressure, I wouldn’t expect to see significant change there,” Kempczinski added.
McDonald’s is targeting discounts that are slightly deeper than the current promotions going forward and expects to maintain the value program in the coming quarters. 
Quick-service companies are also benefiting from strong international businesses, which have outperformed their US-based operations. For McDonald’s, sales growth across its two foreign divisions — which account for nearly 70% of its total store count — outpaced its domestic sales growth in the third quarter.



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