All-Day Breakfast Fuels McDonald's
January 26 2016 - 3:02AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 1/26/16)
By Julie Jargon
McDonald's Corp. posted its best U.S. quarterly sales in nearly
four years, driven by all-day breakfast, in the strongest
indication that Chief Executive Steve Easterbrook's rebuilding
initiatives are gaining traction less than a year after he took the
helm.
Sales at McDonald's U.S. restaurants open at least 13 months
jumped 5.7% in the fourth quarter. That was well above the 2.7%
growth analysts had expected and the best same-store sales results
in the U.S. in 15 quarters.
Signs that a turnaround under Mr. Easterbrook was beginning to
take hold emerged in the third quarter, when McDonald's U.S.
division posted its first quarterly increase in same-store sales in
two years. That momentum continued into the fourth quarter with the
launch of breakfast all day in October -- the company's biggest
strategic change since it rolled out McCafe beverages throughout
the U.S. in 2009.
Investors had expected all-day breakfast to boost sales, but not
to this degree. Globally, same-store sales rose 5%, while analysts
were expecting growth of 3.2%.
On Monday, McDonald's shares closed up 80 cents at $119.20,
while U.S. markets were lower overall.
Mr. Easterbrook, who became CEO last March, called the
fourth-quarter results "a testament to the swift changes we made
and the early impact of our turnaround efforts," and said he
expected the momentum to continue.
He cautioned, however, that it would take at least six more
months of positive same-store sales growth before the company moves
from a turnaround mode to a growth mode.
While all-day breakfast exceeded the company's expectations and
helped the chain gain market share from rivals in the quarter, Mr.
Easterbrook expects the initial boost to settle down.
"That's why we're working on a number of other initiatives," he
told investors during a conference call, referring, in part, to a
new mobile app through which customers can receive coupons. "This
isn't a single-initiative turnaround plan."
The McDonald's chief has enacted numerous changes at a burger
chain that had been struggling to remain relevant with consumers.
He has pared down the menu, provided customers with more
transparency about how its food is made, raised wages for workers
at company-owned stores and announced that McDonald's will switch
to antibiotic-free chicken and cage-free eggs in the U.S.
There have been structural and management changes as well, aimed
at giving local markets more autonomy over the food McDonalds
serves so it can meet local taste preferences.
Simplified menu boards and a new system of confirming orders
twice at the drive-through have improved customer satisfaction
scores, Mr. Easterbrook noted.
The McDonald's chief also staved off pressure to spin off the
Oak Brook, Ill., company's vast real estate holdings, announcing
plans instead to return more cash to shareholders, reduce spending
and sell about 4,000 company-owned restaurants to franchisees by
the end of 2018.
Earlier this month, the company introduced a value menu that it
expects to help solve problems it has had finding the right price
offerings. Its new "McPick 2" menu allows customers to pick a pair
of items for a total of $2 from among four choices: mozzarella
sticks, small fries and the McDouble and McChicken sandwiches.
"McDonald's U.S. business begins 2016 as a customer-led
organization focused on delivering outstanding customer service
through comprehensive simplification efforts, core menu
enhancements and a compelling everyday national value platform,"
the company said in a statement. "Generating sustained, positive
guest traffic remains a top priority for the segment."
Overall, McDonald's posted a quarterly profit of $1.21 billion,
or $1.31 a share, up from $1.1 billion, or $1.13 a share, a year
earlier. Revenue declined 3.5% to $6.34 billion.
Analysts projected earnings of $1.23 a share on $6.22 billion in
revenue for the quarter, according to Thomson Reuters.
---
Lisa Beilfuss contributed to this article.
(END) Dow Jones Newswires
January 26, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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