McDonald's aims to maintain momentum

by Monica Watrous
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McDonald's breakfast
The roll-out of all-day helped boost McDonald's sales in the US.

OAK BROOK, Ill. — McDonald’s same-store sales in the United States surged 5.7 percent in the recent quarter, led by the national rollout of all-day breakfast, which has served to drive incremental business and boost average checks. What’s more, McDonald’s outpaced its quick-service restaurant competitors during the period by nearly 300 basis points, said Steve Easterbrook, president and CEO of McDonald’s Corp. This followed the company’s first quarterly US comparable sales increase in two years.

But McDonald’s recent successes may have some questioning whether the Oak Brook-based fast-food chain can maintain its momentum beyond the hype of extended breakfast hours. 

Steve Easterbrook, president and CEO of McDonald's Corp.
Steve Easterbrook, president and CEO of McDonald’s Corp.

“Well, certainly the idea of outperforming is something we want to maintain,” Easterbrook said during a Jan. 25 earnings call with analysts. “We entered the quarter with good momentum in our business. Clearly that was accelerated through the fourth quarter. …All-day breakfast was a primary driver of that, but not the sole driver. So it exceeded our launch expectations; the period of time for which it exceeded our launch expectations was also a little longer than we had projected, but we do expect it to settle down.”

McDonald’s said it has other initiatives under way, including operational improvements that are improving drive-thru speed and accuracy, and continued investment in food quality, such as the recently announced planned transition to cage-free eggs. Earlier this month, the company unveiled a new value platform, which offers customers a choice of two items for $2. Additionally, McDonald’s said it will remodel 400 to 500 restaurants and rebuild about 90 restaurants in the United States this year.

“All-day breakfast is understandably more of a headline grabber…but we believe that building these other platforms of growth on top of that will keep us competitive in the marketplace and taking share,” Easterbrook said. “You’ve heard me talk about the devil is in the detail always, around toasting of the buns and searing of the beef. And when you ally that with investing in the types of quality investments that customers care about, such as whether it was the antibiotics move we made in the poultry supply chain, or the announcement that we are on our journey of going to cage-free eggs, that just creates a buzz. And when customers know that you care about the same things that they care about, then they just respond with their business.”

McDonald's drive-thru
McDonald’s is working on operational improvements that are improving drive-thru speed and accuracy.

Looking ahead, McDonald’s expects to achieve continued positive top-line momentum across all segments; however, “financial performance in the coming year is not likely to be linear,” said Kevin Ozan, executive vice president and CFO.

“As we move through 2016, we expect some variability in our quarterly results due to uneven prior-year comparisons and some headwinds that exist, including macroeconomic issues in some of our high-growth markets and challenging guest counts in the US, Germany and France,” Ozan said. “Generating sustained positive guest traffic in these markets and around the world remains a top priority for 2016. We also anticipate limited pricing power in several of our markets as a relatively benign commodity outlook and low inflation could impact our ability to influence increase menu board prices.”

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