McDonald’s Corp. posted better than expected first quarter revenue on Tuesday fueled by upbeat global same store sales. The fast food giant attributed the strong sales to fruitful promotions as well as store upgrades.
However, revenue fell from the comparable period a year ago. Adjusted earnings per share fell short of estimates by 3 cents. Shares of McDonald’s climbed 2% in pre-market trading.
McDonald’s reported growth in same store sales globally that crushed expectations and offset negative effect of its strategic refranchising initiative. U.S comparable sales increased 4.5% driven by promotions, such as the 2 for $5 Mix, Donut sticks, the Bacon Event, and Match deal. In addition, upgrade of its stores impacted positively and helped top estimates in the U.S.
During the first quarter, McDonald’s acquired Dynamic Yield, a tech company, and announced a deal with Plexure as it plans on increasing its sales. The transactions will help McDonald’s incorporate and enhance more technology into its business.
Rival fast food chain, Burger King Parent Restaurants Brands International posted downbeat profit for its first quarter on Monday but sales matched estimates. Since the year began, McDonald’s stock has added 11% while the Dow Jones Industrial Average has added 14%.
MCD Earnings & Outlook
Net income for the quarter ended March 31 was $1.33 billion, or $1.72 per share, compared with $1.38 billion, or $1.72 per share reported a year earlier.
Revenue fell to $4.96 billion from $5.14 billion posted in the same period a year ago. Analysts surveyed by Refinitiv were expecting earnings of $1.75 per share on sales of $4.93 billion.
Global same store sales jumped 5.4% surpassing analysts’ estimates of 3.4% increase. U.S comparable sales grew 4.5% topping Wall Street’s estimate of 3.0%. Same store sales in its International Operated segment rose 6% driven by upbeat results in its French and U.K. markets.
McDonald’s CEO Comments
McDonald’s Chief Executive Steve Easterbrook commented, “We started the year strong with our 15th consecutive quarter of positive global comparable sales, reflecting continued broad-based momentum across each of our global segments.”
“We remain focused on running better restaurants and elevating the experience for our customers by providing convenience on their terms through delivery, Experience of the Future, and our evolving digital channels,” Easterbrook added.
McDonald’s Corporation Profile
McDonald’s generates revenue through company-owned restaurants, franchise royalties, and licensing pacts.
Restaurants offer a uniform value-priced menu with some regional variations. As of December 2018, there were roughly 37,900 locations in 120 countries: 35,100 franchisee/affiliate units and 2,800 company units.
After reorganizing the company into segments based on the maturity and competitive position of its different markets, refranchising 4,000 locations, and eliminating $500 million in net annual SG&A expenses the past several years, the company is focused on “velocity growth accelerators” such as Experience of the Future layout (counter, kiosk, web ordering and table service/curbside delivery), mobile ordering and payments, and delivery alternatives.