Changes in menus, more advertising on value-meals, and sales promotion efforts such as expanded late night breakfasts, seems to have worked in favor of the world’s largest burger chain, McDonald’s Corporation (NYSE: MCD).
McDonald’s said that sales at established stores (stores that were open since last 13 months) rose 2.6%, globally, comfortably beating analysts’ forecast for 1.9% gain.
Same-store sales is considered as a key gauge on retail chain’s performance as it excludes sales impact from those stores that were opened (or closed) less than a 13 months ago thereby providing accurate picture on sales trend. In other words, it strips out volatile sales figures which are generally arise from newly opened or recently shuttered stores.
The strategy to revamp the menu was fairly successful in the U.S. Lately; McDonald’s added more items such as Chicken McWraps and Egg White Delight Sandwich even as it increased advertising spending for “value-meals”.
In May, same-store sales in the U.S. rose by 2.4% while analysts were expecting 2.1% gain.
In Europe as well, same-store sales rose more-than-expected in May. While analysts were expecting it to increase by 1.2%, actual same-store-sales grew by 2%.
Commenting over improved sales, Company’s CEO Don Thompson said in a statement, “McDonald’s strategic initiatives and diligent focus on the customer generated global comparable sales growth in May amidst ongoing uncertainty in the macro environment.”
“We are confident in our strategies and competitive advantages and will continue executing our customer-centric Plan to Win to build market share and drive sustained profitable growth,” added Thompson.
However, same-store sales in the rest of the markets were disappointing. Same-store sales in Asia Pacific, the Middle East and Africa increased by 0.9%, but missed analysts’ consensus estimation for 1.5% gains. Sales in China were badly affected due to the outbreak of avian flu. Another U.S. fast food chain, Yum! Brands also witnessed testing times in China in the recent past as consumers over there stayed away from poultry items due to outbreak of bird flu.
Shares gained 1.85% to $100.10 in early trade. The stock which is up about 11% year-to-date is lagging behind S&P 500’s average return thus far, which is 15.2%.
The Company has been losing its traction in the hamburger market as smaller rivals such as Wendy’s and Burger King are luring customers with tweaked,improved value deals and refurbished stores.
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