McDonald's Beats Sales Estimates as Value Meals Pull in Cautious Diners

Reuters
11/05

Nov 5 (Reuters) - McDonald's beat estimates for third-quarter global comparable sales on Wednesday as affordable meal offers from the fast-food giant helped whet demand even as consumers remained selective with their spending.

The burger chain posted global same-store sales growth of 3.6%, slightly ahead of analysts' average estimate of a 3.55% increase, according to data compiled by LSEG, driven by strength across its U.S. and international markets.

Fast-food chains including McDonald's, Domino's Pizza and Taco Bell owner Yum Brands have rolled out cheaper meal bundles and limited-time offers to offset a slowdown in restaurant traffic, as stubbornly high inflation, slower wage growth and rising menu prices discourage price-sensitive customers.

McDonald's has kept its $5 meal deal in place for more than a year, prioritized menu innovation and intensified marketing efforts to revive demand among low-income diners.

Demand spiked in July on the launch of the $2.99 Snack Wraps, though momentum eased in August and September, BTIG analyst Peter Saleh said in a note. In September, the company reintroduced its Extra Value Meals and began working with franchisees to standardize a 15% discount on combo meals nationwide, up from the current 10% to 11%.

But sustaining deep discounts may prove challenging for franchisees once financial support from McDonald's tapers off, analysts have warned.

Overall visits to McDonald's fell 3.5% between July and September from a year ago, compared with a 2.3% decline across the quick-service category, according to data from foot traffic-tracking firm Placer.ai.

Comparable sales in the U.S., its largest market, rose 2.4% in the quarter ended September 30, compared with a 0.3% rise a year earlier.

Sales in its business segment where restaurants are operated by local partners jumped 4.7%, led by Japan, while international market sales rose 4.3%, driven by Germany and Australia.

Quarterly adjusted net income came in at $2.31 billion, or $3.22 per share, compared with $2.32 billion, or $3.23 a year ago.

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