McDonald's Meal Specials, New Menu Items Feeding Sales
January 30 2018 - 10:49AM
Dow Jones News
By Julie Jargon and Cara Lombardo
McDonald's Corp. gained sales again by luring core customers to
its cheapest meals and drinks.
The burger giant attributed U.S. sales growth in the fourth
quarter to a "McPick 2" meal deal and low-priced beverages, as well
as to higher-priced Buttermilk Crispy Tenders. The chain introduced
a new nationwide value menu this month with items priced at $1, $2
and $3.
McDonald's has focused its marketing on its low prices, hoping
that consumers drawn in for $1 sodas will also order more expensive
items. Some franchisees worry the strategy isn't sustainable.
In a recent anonymous survey conducted by Instinet, many
McDonald's franchisees in the U.S. said they worry low-priced items
will eat into their profits, especially as commodity prices rise
again. One franchisee said the new menu is "good for buying guest
counts" but isn't likely to be profitable. Another predicted that
the new dollar menu won't last the year.
Fourth-quarter same-store sales rose 5.5% globally and 4.5% in
the U.S., the largest market for McDonald's. Both figures beat
estimates. While adjusted earnings also rose, revenue dropped 11%
from a year ago to $5.34 billion, stemming from the sale of
company-owned restaurants to franchisees.
McDonald's shares, up 43% in the past 12 months, slid 1% in
early Tuesday trading.
In the past year the chain has attracted customers with food
delivery, a mobile app and discounted drinks. "2017 was a strong
year for McDonald's as customers responded to the many ways we are
making their experience more convenient and enjoyable," Chief
Executive Steve Easterbrook said.
But some have questioned whether the company can maintain the
growth. The company expects another boost midyear with the
introduction of Quarter Pounders made with fresh beef.
Finance chief Kevin Ozan said the company expects to spend about
$2.4 billion of capital in 2018, mostly on upgrading restaurants.
McDonald's plans to open about 1,000 new locations this year.
Overall for the quarter, McDonald's reported a profit of $698.7
million, or 87 cents a share, compared with $1.19 billion, or $1.44
a share, a year ago. Excluding charges related to the new U.S. tax
law, the company earned $1.71 a share, up from $1.43 in the
year-earlier period. Analysts had expected adjusted earnings per
share of $1.59.
The company booked a $1.2 billion tax charge related to foreign
earnings, which was partly offset by a $500 million benefit from
revaluing deferred tax assets and liabilities due to the new lower
corporate tax rate.
Write to Julie Jargon at julie.jargon@wsj.com and Cara Lombardo
at cara.lombardo@wsj.com
(END) Dow Jones Newswires
January 30, 2018 10:34 ET (15:34 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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