McDonald’s U.S. marketing team continues to run on all cylinders, as evidenced by the company’s Q2 earnings results, reported Thursday morning. Those results included a 10.3% increase in U.S. same-store sales, and an increase in visits as well. New Placer.ai data indicates the company’s traffic increased by 9.7% in June, versus the overall QSR segment, which experienced a 3.1% year-over-year increase.
During the company’s earnings call, executives touted the success of the Grimace Shake campaign, launched in early June in celebration of the character’s 52nd birthday. CFO Ian Borden said the campaign quickly became one of the company’s most socially engaging campaigns of all time and contributed to strong sales growth.
“Last quarter, the theme was consistency. This quarter, if I’m honest, the theme is Grimace,” CEO Chris Kempczinski added, pointing to the 3 billion views the Grimace Shake Challenge accumulated on TikTok. “This is another proof point of the power of marketing at McDonald’s today.”
Indeed, the Grimace Shake Challenge helped drive double-digit increases in traffic on the quarter, according to Placer.ai data emailed to Nation’s Restaurant News. But McDonald’s strong quarter also required operational execution to handle this uptick in traffic, and Kempczinski said the company’s PACE program continues to drive improvements there. PACE (Performance and Customer Excellence) was launched in the U.S. earlier this year and includes six to 10 restaurant visits a year from company and third-party assessors to identify opportunities for improvement. Kempczinski said the program has led to operational improvements, faster service times, and an increase in customer satisfaction scores.
McDonalds’ executives also identified the company’s core menu equities and digital business as drivers of its strong quarter. On the core menu side, the chain’s McCrispy – its crispy chicken sandwich rebranded in March – has “resonated with customers and driven significant chicken market share gains,” according to CFO Ian Borden. He said the company has gained share in beef, as well.
On the digital side, the sales mix is now nearly 40% in the company’s top six markets, with over 52 million 90-day active members enrolled in its loyalty program. Last quarter, McDonald’s introduced an order enhancement feature within its app and early results have been positive.
“We’re seeing elevated sales initiated through the app, increased customer satisfaction and improved service times. As our relationships with customers continue to grow, it will unlock additional customer needs at a scale only McDonald’s can achieve,” Kempczinski said. “Digital for us is a virtuous loop. The stronger the digital business, the more it’s driving engagement and app downloads.”
That engagement comes as executives noted McDonald’s consumers are showing consistency and expressed confidence in the chain’s ability to win over value seekers as the macroenvironment remains uncertain.
“Overall, there hasn’t been a dramatic change in the U.S. consumer. We’re seeing sentiment improving a little bit, but it’s certainly still far off from 2019,” Kempczinski said. “We are gaining share in the incomes under $100,000, suggesting a benefit from trade down from full-service, casual, etc. Then if you go to incomes of $45,000 or less, our business is performing well there. We’re seeing a little decrease in order size, but it’s offset by continued strength in traffic. Our business, particularly our value proposition, puts us in a good position to continue to drive market gains.”
Borden added that some trends have remained consistent for several quarters, such as consumers ordering “a little less,” but that consistency versus “further deterioration is encouraging.”
That said, Borden cautioned that a potential moderation in topline growth could come toward the end of the year as some costs – food, paper and labor – remain elevated. Whether that is or isn’t the case, McDonald’s plans to “play the long game” by continuing to execute against its Accelerating the Arches 2.0 strategy.
“This is a momentum business and when you’ve got momentum, it helps and it can be self-perpetuating,” Kempzcinski said. “You don’t want to get complacent on that, but the fact that we’ve got momentum gives us ambition and our operators willingness to invest. We believe we have a long runway here.”
Q2 by the numbers:
- Global comp sales up 11.7%
- U.S. comp sales up 10.3%
- Consolidated revenues increased by 14% to $6.5 billion
- Systemwide sales increased by 12%
- Net income, $2.3 billion
- Diluted earnings per share, $3.15
Contact Alicia Kelso at [email protected]
