McDonald's Beats Sales Estimates As Cheaper Burgers Draw Consumers

Reuters

New Delhi: McDonald's (MCD.N) beat market expectations for quarterly comparable sales on Thursday, as the restaurant chain's relatively cheaper burgers and fries attracted cost-conscious diners in an inflationary environment. The company's shares rose more than 2% to $298.82 in premarket trading.

While U.S. restaurant chains including McDonald's have had to raise prices to offset a hit to profit from higher costs, the company has still managed to keep its prices lower than its competitors.

McDonald's also tried to attract more diners to its more than 13,000 outlets in the United States with promotional deals such as the Grimace Birthday Meal, a popular limited-time launch featuring purple milkshakes, created in honor of the Grimace character in McDonald's ads.

Those moves, coupled with improved staffing levels at its chains, have helped McDonald's gain market share from its peers. Placer.ai data showed traffic at the restaurant's U.S. locations jumped 8.4% in the second quarter. In contrast, overall traffic at fast-food and quick-service chains climbed just 1.2% in the same period.

McDonald's said its global comparable sales jumped 11.7% in the second quarter, handily beating analysts' average estimate of an 8.88% increase, according to Refinitiv IBES data.

Easing costs of key ingredients including chicken, cheese and pork have also helped McDonald's, whose total restaurant margins in the United States climbed 12% in the quarter. Margins at company-operated U.S. stores rose 11%.

Comparable sales for McDonald's in the United States climbed 10.3% in the quarter, compared with the estimates of an 8.6% rise, while those in its internationally operated markets rose 11.9%, beating expectations for an 8.2% growth.

McDonald's net income nearly doubled to $2.31 billion in the three months ended June 30. Excluding items, McDonald's earned $3.17 per share. Analysts on average were expecting a profit of $2.79 per share.