McDonald's Delivers First Quarterly SSS Growth in Years
Finally, McDonald’s has something good to talk about besides all-day breakfast.
According to the company’s third-quarter earnings release, almost all the numbers look great, or at least better than the much-maligned fast-food giant has in the past few years.
The brightest spots were same store sales and EPS. Comps were up 4.0% globally. They were up 0.9% in the U.S. for the first time in two years and jumped 8.9% in China as the brand lapped major supply-chain issues that scared Chinese consumers away. Those numbers easily beat consensus of 1.9%.
EPS for the quarter came in at $1.40, beating analyst estimates of $1.28-$1.30 handily and returned $3.1 billion to investors via repurchases and dividends.
Revenue and income, however, were both down globally 5% and 2% respectively as wages and benefits spending increased in the U.S. Income in China, however, surged 39% as consumers returned to the restaurants.
In the U.S., third quarter comparable sales increased 0.9%, the segment's first quarterly comparable sales increase in two years. The introduction of the new Premium Buttermilk Crispy Chicken Deluxe sandwich and breakfast, including a return to the classic recipe ingredients for McDonald’s iconic Egg McMuffin, contributed to the segment's performance.
U.S. third quarter operating income declined 1% as a result of an incremental investment in wages and benefits for all eligible company-operated restaurant employees, designed to improve restaurant performance and enhance the brand. Moving forward, rebuilding customer traffic remains a top priority for the company.
Wall Street responded to the numbers with a more than 7.5% bump, this is on top of the recent modest gains at the onset of all-day breakfast; which are not reflected in the Q3 numbers.
The rosy report makes one ponder whether McDonald’s has begun a turn toward growth. The fourth quarter will certainly be a telling period for the brand as lower price points for all-day breakfast items could hamstring comp growth even if traffic grows.