McDonald’s Posts Biggest Global Sales Gain in Seven Years

(Bloomberg) -- McDonald’s Corp. grew at a blistering pace in the latest quarter, with the world’s biggest restaurant chain reporting its best global sales rise since 2012 as new delivery partnerships and investment in breakfast are proving to be the right sauce.

• Same-store sales climbed 6.5% globally, bolstered by a 5.7% rise in its critical home market. Both gains surpassed analyst estimates compiled by Consensus Metrix.

Key Insights

• New breakfast items like donut sticks have helped McDonald’s compete in a hyper-competitive U.S. fast-food market. Discounting has also drawn in diners, with its two-for-$5 deals especially resonating. Gordon Haskett analysts called the lack of margin expansion the “lone knock” on the quarter.
• The positive report comes on the heels of a similarly strong quarter for breakfast rival Starbucks Corp., signaling global consumers are still looking for convenience and at big-name chains.
• McDonald’s is investing in delivery to help fuel sales, especially in the U.S. market, and it’s working. This month, it added provider DoorDash Inc. to its existing partnership with Uber Eats. Going forward, there’s more room to grow delivery internationally, with the U.S. now pretty well covered.
• Still, there are pressures ahead. The burger chain is facing rising labor and commodity costs, which have already resulted in some increased menu prices. International commodity prices will be up 2.5% this year compared to last year because of rising protein costs, the company said on a call, worse than the 2% gain the company had been forecasting heading into the latest quarter.

Market Reaction

• The shares rose as much as 1.7% as of 9:31 a.m. Friday to $218.16, the highest intraday level on record. They had already risen 21% this year through Thursday’s close, just outpacing the S&P 500 index.

Get More

• For more on the results, click here.
• For the company statement, click here.

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