McDonald’s reported consistent 12.6% same-store sales increases across all markets for the first quarter ended March 31, 2023, driven by both traffic growth and menu pricing. This trend has made them a standout among competitors who have been relying solely on pricing increases to bolster same-store sales.
For McDonald’s, traffic rose for the third consecutive quarter despite inflationary pressures, which the company said during Tuesday’s earnings calls is driven by the brand’s value proposition. In an era of economic uncertainty, McDonald’s sales and traffic consistency makes them an outlier. In fact, according to Placer.ai, McDonald’s traffic growth has been consistently positive in the high single digits-double digits throughout 2023, while the rest of the quick-service industry has been struggling with negative traffic, on average, over the past six weeks.
McDonald’s executives also stated that for the most part, any price increases have been accepted by customers, with “in some places resistance to pricing”—a further indicator of the inflationary challenges across the country.
“We're seeing really good consistency — a mix of check and traffic growth— around how we're positioned from a value and affordability standpoint,” Ian Borden, McDonald’s CFO said during Tuesday’s earning call. “[…] It’s about the focus on execution, which is coming to life across every part of our business, and how that's translating into a better experience. And we're seeing really good consistency in that feedback from our customers and in the improvement in the customer satisfaction scores that we're seeing.”
Consistency in both traffic and performance is a positive outcome of the company’s focus on the Accelerating the Arches strategy 2.0 which was announced in January, with goals of maximizing marketing, committing to the core and doubling down on the four Ds (delivery, digital, drive-thru and development).
The two newer elements of that strategy include accelerated restaurant development and what they are calling “accelerating the organization,” which involves improving efficiency across various aspects of the company (and might include the corporate layoffs announced earlier this month). On the restaurant development side of things, McDonald’s CEO Chris Kempczinski said that the goal is to open restaurants “at a faster rate than we have historically,” while the second element of the strategy involves working across silos to problem-solve horizontally, including speed of service:
“For example, is our app offering a seamless and personalized user experience?” he said during Tuesday’s earnings call. “We continue to increase our speed of service. […] To support our ambition to scale innovations with greater agility, and collaborate more effectively, our second key shift is […] to standardize the common processes we use to drive consistency and enable speed.”
Digital channels continue to be a major growth sector for McDonald’s, as digital sales now represent 40% of all orders across the top six markets in the system, equating to nearly $7.5 billion of more than 30% over the last year. The company is also growing its loyalty userbase and working on continued personalized experiences by parsing consumer behavior through data.
“As more of your customer base becomes identified, I think you can get much more specific around how you're delivering personalized value,” Kempczinski said. “For example, I love our McChicken sandwich and I order it all of the time. I should never be getting an offer on my app for the McChicken sandwich. We’re going to get to that level of sophistication. […] We’re laying a foundation for a very intimate connection with our customers.”
McDonald’s revenue increased 4% from $5.7 billion to $5.9 billion, with net income growth up 63% from $1.1 billion or $1.48 earnings per share to $1.8 billion or $2.45 earnings per share.
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