McDonald's sets stage for continued momentum

by Monica Watrous
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McDonald's
More customers visited a McDonald’s restaurant in the recent quarter than the year before.

OAK BROOK, ILL. — More customers visited a McDonald’s restaurant in the recent quarter than the year before, driving the fast-food company’s seventh straight quarter of global comparable sales growth, said Steve Easterbrook, president and chief executive officer of McDonald’s Corp.

Steve Easterbrook, McDonald's
Steve Easterbrook, president and c.e.o. of McDonald’s

“Today, we are running better restaurants, maintaining focus on operations excellence and on the fundamentals of quality, service, cleanliness and value, and it's making a difference for customers,” Mr. Easterbrook said during an April 25 earnings call.

Net income in the first quarter ended March 31 was $1,214.8 million, equal to $1.47 per share on the common stock, up 8% from $1,124.8 million, or $1.25 per share, in the prior-year period. Total revenues were $5,675.9 million, down 4% from $5,903.9 million. The decline was due to the impact of refranchising.

Global comparable sales increased 4%, reflecting positive comparable sales in all segments, including a 1.7% gain in the United States, building on strong prior-year results. Globally, guest counts increased 0.6% in the quarter.

McDonald's self-order kiosks
By the end of the year, approximately 2,500 U.S. restaurants will feature elements of McDonald’s Experience of the Future.

“We're in a stronger position in the U.S. today, a cumulative impact of the moves we've made the past couple of years,” said Kevin Ozan, chief financial officer and corporate executive vice-president. “Comparable sales grew 1.7% for the quarter, fueled by ongoing customer enthusiasm for All Day Breakfast; the Big Mac promotion, featuring the Grand Mac and Mac Jr.; and our beverage value offerings.”

In the fast-food sandwich category, McDonald’s outpaced its competitors by 2.1% in the first quarter, he added.

To maintain its momentum in the United States, McDonald’s largest market, the company is prioritizing three “velocity accelerators designed to drive growth on top of everything else we’re doing,” Mr. Easterbrook said. The three initiatives are digital, delivery and “Experience of the Future.”

By the end of the year, approximately 2,500 U.S. restaurants will feature elements of McDonald’s Experience of the Future, such as self-order kiosks and table service. The company plans to convert most of its traditional restaurants in the U.S. system by 2020.

McDonald's mobile order and pay
McDonald’s is expanding its mobile order and pay technology to 20,000 restaurants around the world by the end of the year.

“Markets in the U.K. and Canada have reached the critical mass with Experience of the Future are seeing growth in both guest counts and average check size, leading sales lifts in the mid-single digits,” Mr. Easterbrook said.

Additionally, McDonald’s is expanding its mobile order and pay technology to 20,000 restaurants around the world by the end of the year.

“In the U.S. alone, mobile order and pay will be in 14,000 restaurants by the end of the year,” Mr. Easterbrook said. “We're already in 400-plus restaurants across the U.S., including Chicago, Monterey, Salinas, Spokane and Washington, D.C. Globally, deployment is under way in markets, including the U.K., Australia and China.”

Delivery represents another important opportunity for McDonald’s, which already offers delivery service in more than 3,500 restaurants around the world, primarily in Asia and the Middle East. Currently in the United States, McDonald’s is partnering with UberEats to deliver food in select markets.

“Through delivery we'll bring the McDonald's experience to more customers, whether it's in their homes, their dorm rooms to their workplace and beyond,” Mr. Easterbrook said. “We're encouraged by the results in Florida and are expanding to additional cities in the U.S. this quarter.”

In addition to these drivers, food quality is another area of focus for McDonald’s, which recently announced plans to introduce fresh beef for its Quarter Pounder sandwiches in its U.S. restaurants nationwide next year.

The company also is bolstering its leadership team with the addition of three executives. Bob Rupczynksi, formerly head of global media and digital at Mondelez International, has been named global vice-president of customer relationship management. Linda VanGosen has been named head of U.S. Menu. She joins McDonald’s from Starbucks, where she was responsible for the overall vision and strategic growth plans for Starbucks Evenings. Morgan Flatley, previously chief marketing officer of global nutrition at PepsiCo, Inc., has been named U.S. chief marketing officer at McDonald’s.

“We're continuing to see great talents step into important roles,” Mr. Easterbrook said. “And I know that together, we'll be successful in accelerating the growth of the business.” 
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