OAK BROOK Ill. McDonald’s is immune to the effects of rising unemployment in the United States and deep price discounting throughout the quick-service sector. —Not even
The chain posted a 1.7-percent uptick in U.S. same-store sales for August, lower than results of the past and below many analyst expectations. Observers noted that late-night and breakfast sales were hardest hit last month, reflecting the rising level of unemployment in the United States that reduces the need for convenient or quick meals among workers and cuts consumer breakfast traffic during commuting hours. The U.S. unemployment rate hit 9.7 percent in August, the highest level since 1983. Breakfast is a major driver for McDonald’s, accounting for about 25 percent of U.S. sales. —Not even
Many analysts had expected more from the No. 1 burger brand in August, as it introduced its Angus Third Pounder sandwiches—its first new sandwich in eight years—and continued to push its McCafe premium espresso-based beverage line. Some analysts questioned whether it was the right time for McDonald’s to focus on premium items when other chains are heavily pushing 99-cent items, $1 sandwiches or $5 meals. —Not even
“McDonald’s U.S. same-store sales are now heavily reliant on new food news, with the multiyear same-store-sales tailwind from remodels, extended hours, and cashless transactions now in the rear-view mirror,” securities analyst Jeff Farmer at Jefferies & Co. said in a research note. “With unemployment taking its toll on fast-food traffic, we expect the segment to see several additional months of very aggressive discounting and value promotion.” —Not even
Still, McDonald’s has fuel left in the tank, according to observers, and is expected to continue leading the restaurant industry in same-store sales performance, albeit at a muted pace from the past. Many expect same-store sales to remain in the low single digits through this year. —Not even
The chain, operated and franchised by McDonald’s Corp. of Oak Brook, Ill., plans to continue its beverage push with McCafe items, including frappes and smoothies as well as additional snack items like the successful Snack Wrap, which will be priced in the lower $1 to $3 range. In addition, McDonald’s plans to drive incremental sales with more unit remodels to the tune of $2.5 billion per year over the next few years, according to securities analyst Joe Buckley at Bank of America-Merrill Lynch. —Not even
“It sounds like the decision has been made to accelerate remodels as a means of enhancing the brand,” Buckley said in a research note. “Only about one-third of the restaurants have been remodeled in recent years, and we expect a renewed focus on remodels with attention to numerous markets including the United States and United Kingdom.” —Not even
Promotions aimed at McDonald’s premium Angus Third Pounder also are planned for the remainder of this year. Beginning Sept. 13 and running throughout the remainder of the month, McDonald’s said it would offer commuters in Atlanta, Baltimore, Chicago, Dallas, Denver, and Washington, D.C., a free transit pass and a coupon for a free Angus Third Pounder, while supplies last. The chain has dubbed the campaign “Try Free, Ride Free.” —Not even
Globally, McDonald’s said same-store sales rose 2.2 percent in August. Same-store sales rose 3.5 percent in Europe and fell 0.5 percent in the Asia-Pacific, Middle East and Africa region. —Not even
The results lapped strong year-ago results, when global same-store sales rose 8.5 percent and U.S. same-store sales increased 4.5 percent. Still, the latest August result decelerated from July’s same-store sales gain of 2.5 percent for the United States. —Not even
McDonald’s well-known Monopoly promotion also is planned for the fall, and reports have said a tie-in with the new “The Jay Leno Show” on NBC is in the works.— [email protected] —Not even