McDonald’s same-store sales rose for the second straight quarter in the U.S. | Photo courtesy of McDonald’s.
McDonald’s same-store sales rose 2.4% in the U.S. last quarter as the company’s Snack Wrap kept the company in positive territory following a two-year sales slump, the fast-food giant said on Wednesday.
The company’s domestic performance was largely steady compared with the previous period, and was largely driven by a higher average check.
Worldwide, same-store sales rose 3.6% as every major market showed positive numbers. Same-store sales in the company’s International Operated Markets, including its more mature international locations, rose 4.3%, led by Germany and Australia.
Same-store sales rose 4.7% in the company’s International Developmental Licensed Markets, led by Japan, the company said.
Systemwide sales, which includes sales generated by company and franchise restaurants, increased 6% in the quarter. Revenues increased 3% to $7.08 billion. Net income increased 1% to $2.3 billion, or $3.18 per share.
The earnings result missed Wall Street expectations, according to the website Earnings Whispers.
McDonald’s went into the quarter with high hopes as the chain brought back the Snack Wrap, which apparently generated strong sales early in the period before slowing more recently.
The Snack Wrap was one of the most successful chicken product launches in McDonald’s history, executives told analysts on Wednesday. One in five customers ordered the product during the initial four-week launch period, and though it has slowed since the company said the wrap continues to pull in business.
Late in the quarter, the company brought back Extra Value Meals after convincing franchisees to lower prices on the combo meals so they are at least a 15% discount on the items bought separately. The company also priced its Big Mac Extra Value Meal at $8 for a limited time, a rare national price point on the company’s signature combo meal.
Executives said they were pleased with the performance of the value meals and said they expect same-store sales and traffic will build over time as awareness of the meals builds.
The Chicago-based company took those steps amid deep concern about the state of the economy, particularly as it relates to lower-income consumers.
Those consumers have been cutting back on dining at fast-food restaurants in recent years, frustrated by rising menu prices. McDonald’s and other fast-food chains have largely blamed consumer weakness for sluggish sales and customer traffic. McDonald’s in particular launched a $5 meal deal offer last year and then consolidated its discounts in January with the debut of the McValue Menu before finally lowering combo meal prices.
CEO Chris Kempczinski on Wednesday told analysts to expect that dynamic into next year, noting that quick-service restaurant traffic among low-income customers is down in the double digits, while traffic among higher-income consumers is up double digits. “We continue to see a bifurcated consumer,” Kempczinski told analysts.
Executives did have more positive things to say about the current quarter, which includes the launch of its Monopoly campaign for the first time in a decade. Executives said that Monopoly has driven strong downloads of its mobile app and signups for its MyMcDonalds Rewards loyalty program, where active users now number 45 million.
CFO Ian Borden said that the company expects same-store sales to “accelerate” in the U.S., thanks in part to easier comparisons following the E. coli outbreak last year, along with Monopoly, Extra Value Meals and other programs. “We certainly believe we’re positioned to deliver another solid quarter of growth in each of our segments,” he said.
Same-store sales in the company’s International Operated Markets, including its more mature international locations, rose 4.3%, led by Germany and Australia.
Same-store sales rose 4.7% in the company’s International Developmental Licensed Markets, led by Japan, the company said.
UPDATE: This story has been updated to add information from McDonald’s third-quarter earnings call.
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