Company credits breakfast and everyday value items for boosting results
Global same-store sales rebounded slightly for McDonald’s Corp. in August after the company’s extremely rare flat results in July, but challenges related to low consumer confidence persisted across its three major operating regions.
Same-store sales at the more than 14,000 McDonald’s restaurants in the United States improved from a 0.1-percent decrease in July. For the month, McDonald’s global same-store sales rose 3.7 percent, comprising gains of 3 percent in the United States, 3.1 percent in Europe and 5.7 percent in the company’s Asia-Pacific/Middle East/Africa, or APMEA, division.
The company creditedand everyday value for driving results, and securities analysts noted that McDonald’s increased advertising for the Breakfast Dollar Menu in mid-August. Analysts also pointed out that the chain increased promotion activity in August for the “Favorites Under 400 Calories” menu, which was the main tie-in with this year’s Summer Olympics sponsorship. McDonald’s also had a 1.6-percent benefit to sales due to a favorable trading day adjustment.
Andy Barish of Jefferies & Company wrote in a research note that the company “will likely continue to tweak its value platform to manage margins while maintaining a bar-belled menu strategy,” especially as quick-service rivals also intensify their value messaging.
He continued, “Given the lack of exciting new news in recent history, there could be an innovative, premium product introduced this fall to help reignite the menu.”
Results in Europe continued to suffer from the drag of soft sales in Germany and southern countries with severe unemployment problems, such as Spain and Portugal. The region did recover from a 0.6-percent decrease in same-store sales in July, with the United Kingdom and Russia once again providing much of the lift. As the host country to the Summer Olympics, the United Kingdom got a major promotional boost, analysts noted.
Sara Senatore of Bernstein Research wrote in a research note that France’s system was beginning to see good traction from its new value menu. “France performed solidly,” she wrote, “boosted in part by a national outdoor billboard advertising campaign for its Petits Plaisirs offerings.”
APMEA recorded the largest month-to-month improvement, going from a 1.5-percent same-store sales decrease in July to the 5.7-percent increase in August, reflecting a significant effect from the timing of the Ramadan holiday in several markets.
Senatore of Bernstein Research estimated same-store sales in Japan to have decreased by 2.5 percent in August, as improved guest counts in that market were offset by a lower average check resulting from a value menu focus. APMEA’s other two major countries, China and Australia, drove strong results, benefiting from successful value promotions in the former and the ongoing popularity of the Loose Change value menu in the latter, Senatore wrote.
Oak Brook, Ill.-based McDonald’s operates or franchises more than 33,500 restaurants in 119 countries.