McDonald’s Sales Beat as Bacon Pays Off, But Costs to Rise Ahead

(Bloomberg) -- McDonald’s Corp.’s first-quarter results beat estimates as it gets a boost from delivery in its home market, plus new breakfast items that keep diners coming in outside the lunch rush.

  • Convenience-craving customers helped push same-store sales up 4.5 percent in the U.S., beating the 3 percent gain analysts had expected. Sales by that measure rose 5.4 globally, surpassing Consensus Metrix estimates.

Key Insights

  • McDonald’s has been counting on delivery to fuel sales, especially in the fiercely competitive U.S. market. While it has a partnership with Uber Eats, it may also turn to other providers as franchisees seek higher profits related to the service.
  • The fast-food giant has been working to regain morning diners with new breakfast items now that the original buzz over all-day breakfast has died down. It’s working: Its newly launched donut sticks in the U.S. successfully won early eaters, along with a free bacon marketing stunt in January.
  • Still, the chain has been facing higher labor and commodity costs and has been raising menu prices to help its margins. The company had previously said commodity expenses will increase as much as 1 to 2 percent this year in the U.S., but now it’s saying it could be as high as 3 percent, according to a filing.

Market Reaction

  • McDonald’s shares were little changed in New York Tuesday. Through Monday’s close, the shares have risen 11 percent this year, less than half the gain of Burger King-owner Restaurant Brands International Inc.

Get More

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

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