CHICAGO – Since the launch of its Velocity Growth Plan in March 2017, McDonald’s Corp. has been progressing steadily toward three key components of its strategy: technology, delivery and Experience of the Future (EOTF) restaurants. The efforts contributed to the fast-food chain’s success in the first quarter of 2019.
“This marks our 15th consecutive quarter of positive global comp sales, despite some of the continuing macroeconomic uncertainties around the world,” said Stephen J. Easterbrook, president and CEO of McDonald’s, during an April 30 conference call with financial analysts. “We also grew global guest counts for the quarter. In the US, we are pleased with our performance to start the year. The market continues to execute against the most ambitious plan in our history. And whilst we recognize we have a lot of hard work ahead of us, we are encouraged with our progress and improved franchisee cash flow to start the year.”
Net income for the first quarter ended March 31 was $1,328.4 million, equal to $1.78 per share, down 3 percent from $1,375.4, or $1.79, in the year-ago period. Adjusted diluted earnings per share remained flat at $1.72, according to the company.
Total revenues for the quarter declined 4 percent to $4,955.6 million from $5,138.9 million, affected by labor, higher commodity costs and Experience of the Future restaurant remodels in the United States.
Global comparable sales increased 5.4 percent in the quarter, reflecting more than $1 billion of growth across the system, Easterbrook said.
“We’re off to a strong start for 2019,” he said. “Where 2018 focused on considerable transformation and building a foundation for growth, our 2019 focus is on operation execution in our restaurants and optimizing the experience for our customers.”
McDonald’s laid the foundation for its technology strategy in 2018, including focus on its global mobile app, self-order kiosks and digital menu boards. Building on that groundwork, McDonald’s in March acquired Dynamic Yield, a company specializing in personalization and decision logic technology.
Dynamic Yield’s decision technology allows McDonald’s to vary its outdoor digital drive-thru menu displays to show food based on time of day, weather, current restaurant traffic and trending menu items. The technology also suggests and displays additional items to customers’ orders based on their current selections. The company has already begun its rollout of Dynamic Yield technology and has the system up and running in 700 drive-thrus across the US, Easterbrook said.
“Over time, using data from the millions of customers that we serve daily, the technology will get smarter and smarter through machine learning,” Easterbrook said. “Long-term, this technology will work across all of our digital platforms, including our self-order kiosks and our global mobile app. When our technology ecosystem is linked, it will provide a seamless ordering experience for our customers.
“By acquiring Dynamic Yield, we also have access to strong data science and engineering talent, who will help us stay ahead of the curve when it comes to connecting with our customers in more personalized ways. This acquisition is just one tangible demonstration of the steps we're taking to leverage industry-leading, innovative technology to accelerate our growth and offer our customers an even easier, more enjoyable experience.”
McDonald’s also plans to grow its delivery footprint in 2019. Delivery has grown to a $3 billion business for McDonald’s restaurants globally, and the company now offers delivery in more than 20,000 restaurants across 75 countries, marking more than half of all McDonald’s restaurants globally.
“We know how important it is continue meeting our customers' increasing demands for convenience, especially through delivery,” Easterbrook said. “Delivery remains a key part of our Velocity Growth Plan. It has been one of our most successful accelerators from the start, likely due to the speed at which we began to implement it and because we began scaling our delivery offering at a time when customers are eating out less. Our ability to continue expanding our delivery reach further demonstrates how our size, scale and convenient locations close to customers gives us a tremendous advantage.”
To continue delivery’s trajectory, McDonald’s said it is turning its focus to driving awareness of the delivery business.
“Awareness remains one of our greatest opportunities with delivery,” Easterbrook said. “So, we're committed to making sure more and more customers are aware of McDelivery and the opportunity that exists for them to enjoy McDonald’s wherever they are.”
While the company expands its reach in off-premises purchases, McDonald’s is also investing in its in-restaurant offerings. During the recent quarter, McDonald’s converted 400 US restaurants to the EOTF model, which features self-order kiosks and cut-front counters. The remodels bring McDonald’s total EOTF restaurants to 8,000, or about 60 percent of its estate in the US. The company expects to complete approximately 2,000 projects in 2019.
“As we continue on our EOTF journey in the US, we are now seeing an overall net positive contribution to comp sales from our aggressive modernization efforts,” said Kevin M. Ozan, executive vice president and CFO of McDonald’s. “This means that the sales lifts from completed projects now exceed the downtime impact from current projects under construction.”