McDonald's July same-store sales beat expectations

McDonald’s Corp.’s 0.7-percent increase in global same-store sales for the month of July slightly beat the company’s own projection of flat comparable sales, helped by better-than-expected performance in the United States.

For the Oak Brook, Ill.-based chain’s more than 14,000 locations in the United States, July same-store sales increased 1.6 percent, rising above expectations for flat-at-best comparable sales expected by several securities analysts. However, same-store sales decreased 1.9 percent in both Europe and the Asia/Pacific, Middle East and Africa, or APMEA, division.

“McDonald’s Plan to Win and our three global growth priorities — to optimize the menu, modernize the customer experience and broaden accessibility to [the brand] — continue to serve as our strategic roadmap, keeping us focused on delivering great-tasting, affordable meals in modern restaurants,” chief executive Don Thompson said in a statement. “In July, we delivered modest global comparable-sales growth, relatively in-line with our expectations. Looking ahead, we remain focused on building market share and strengthening our position as our customers’ favorite place and way to eat and drink.”

Results in the United States benefited from McDonald’s annual “Monopoly” promotion, which typically runs in October but was pulled forward to July. While freebies awarded on many Monopoly game pieces typically are core McDonald’s products like Big Macs or Chicken McNuggets, the promotion also featured several new products the chain has launched in the United States this spring, such as the Egg White Delight McMuffin, new varieties of Quarter Pounders and Premium McWraps, chief financial officer Pete Bensen said during last month’s conference call discussing McDonald’s second-quarter earnings.

“We know that Monopoly is always a great transaction driver, and these new products are prominently featured in the Monopoly promotions,” Bensen said on the call. “Following those product launches up with Monopoly seemed like a very prudent thing to do.”

Executives also hinted on that call that executing the Monopoly promotion earlier might open up October as a window for another major launch of a new menu item.

In a research note, Sterne Agee analyst Lynn Collier wrote, “New products on the horizon could be a catalyst for driving same-store sales improvement, particularly in the U.S.,” for McDonald’s. She added that the chain’s positive performance in July was “encouraging” for the quick-service segment, especially since casual-dining sales appeared to worsen during the month.

Another analyst, Matthew DiFrisco of Lazard Capital Markets, also wrote that McDonald’s likely is outpacing its peers in the quick-service segment.

“Though U.S. trends remain choppy and the July same-store sales suggest a slowdown of the two-year trend, McDonald’s is likely still outperforming its domestic burger peers,” DiFrisco wrote. “Breakfast, core offerings and everyday value are driving the outperformance, along with Monopoly and Premium McWraps. McDonald’s barbell strategy of driving premium and everyday value is supporting same-store sales growth.”

Weaker results in key markets around the world pressured same-store sales in Europe and APMEA, the company said.

The European division of McDonald’s continued to benefit from positive sales in the United Kingdom and Russia, but that was not enough to offset negative performance in Germany, France and southern European markets dealing with high unemployment and austerity measures.

APMEA’s three key markets of Japan, Australia and China had negative same-store sales in July, contributing to the division’s overall decrease. A calendar shift involving the timing of the Muslim holiday of Ramadan also negatively impacted July sales, McDonald’s said.

The company operates or franchises more than 34,500 restaurants in more than 100 countries.

Contact Mark Brandau at [email protected].
Follow him on Twitter: @Mark_from_NRN