By Savyata Mishra (Reuters) -McDonald’s beat estimates for third-quarter global comparable sales on Wednesday as affordable meal offers from the fast-food giant helped whet demand even as consumers remained selective with their spending. Shares of the company rose 3.5% in early trading. Strength across its U.S. and international markets helped the burger chain post global […]
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McDonald’s value meals, offers drive sales beat as spending stays tight
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By Savyata Mishra
(Reuters) -McDonald’s beat estimates for third-quarter global comparable sales on Wednesday as affordable meal offers from the fast-food giant helped whet demand even as consumers remained selective with their spending.
Shares of the company rose 3.5% in early trading.
Strength across its U.S. and international markets helped the burger chain post global same-store sales growth of 3.6%, slightly ahead of analysts’ average estimate for a 3.55% increase, according to data compiled by LSEG.
Fast-food chains including McDonald’s, Domino’s Pizza and Taco Bell owner Yum Brands have rolled out cheaper meal bundles and limited-time offers to offset a slowdown in restaurant traffic.
McDonald’s executives pointed to high prices of essentials such as rent, food and childcare weighing on low-income consumers. “So long as that consumer cohort is feeling like real incomes are under pressure, I wouldn’t expect to see significant change there,” CEO Chris Kempczinski said on a post-earnings call.
DEALS TO THE RESCUE
McDonald’s has kept its $5 meal deal in place for more than a year, prioritized menu innovation and intensified marketing efforts to revive demand among low-income diners.
It expects U.S. comparable sales growth to accelerate in the fourth quarter, also helped by strong early momentum from its Monopoly promotion in October.
“(Promotional) efforts appear to be paying off as (McDonald’s) drove cost-conscious diners to spend at a time when pricier chains like Chipotle and Cava are seeing consumers pull back,” said Emarketer analyst Zak Stambor.
In September, the company reintroduced its Extra Value Meals and began working with franchisees to standardize a 15% discount on combo meals nationwide, up from the current 10% to 11%.
“For McDonald’s, the Snack Wrap is a good example of a ‘fan favorite’ and is a high-margin, low-cost menu item for consumers (also immune to beef costs) and I would expect more of these a la carte options to return as it gives consumers more control over how they spend their wallet share,” said Brian Mulberry, senior client portfolio manager at Zacks Investment Management.
Comparable sales in the U.S., McDonald’s largest market, rose 2.4% in the quarter ended September 30, compared with a 0.3% rise a year earlier.
Sales in its business segment where restaurants are operated by local partners jumped 4.7%, led by Japan, while international market sales rose 4.3%, driven by Germany and Australia.
Quarterly adjusted profit per share came in at $3.22 per share, below analysts’ estimate of $3.33, per data compiled by LSEG.
(Reporting by Savyata Mishra in Bengaluru; Editing by Devika Syamnath)