McDonald's Shares Soar as Easterbrook Turnaround Takes Hold
McDonald's shares soared the most in almost seven years after third-quarter profit topped analysts’ estimates, showing Chief Executive Officer Steve Easterbrook’s plan to turn around the world’s largest restaurant chain is gaining traction.
Net income in the quarter rose 23 per cent to $1.31 billion, or $1.40 a share, the US-based company said in a statement Thursday.
Easterbrook has been working to take McDonald’s back to basics since ascending to the CEO position in March. He’s tweaked the menu, paring back weaker-selling items while adding a few new offerings, such as a buttermilk chicken sandwich, that have been hits with customers. The world’s largest restaurant chain also has renewed a focus on providing value for customers with a popular $2.50 meal deal.
The changes helped propel global same-store sales to their best performance in more than three years, with gains coming from all of its geographic divisions.
"The return to positive same-store sales across all of the operating segments is huge progress for their turnaround plan," said Jennifer Bartashus, an analyst at Bloomberg Intelligence.
Sales at locations open at least 13 months rose 4 per cent globally, topping analysts’ average estimate for a 1.9 per cent increase. US same-store sales rose 0.9 per cent in the quarter, marking the best performance in more than two years and beating analysts’ average projection for a 0.2 percent decline.
McDonald’s still has a ways to go. The company may need to further simplify its menu by removing more items, as well as continue to improve order speed and accuracy. And while it now has a national smartphone app, the chain is still behind rivals for mobile ordering and pay.
The company also is facing a shifting fast-food landscape, with chains like Chipotle Mexican Grill luring away millennials in search of better ingredients. At the same time, rivals Shake Shack Inc. and Five Guys Burgers & Fries are winning over the burger crowd.
To keep its recent momentum going, McDonald’s earlier this month started selling breakfast items all day, a move customers had long urged the chain to make. The chain has also tried to upgrade its food by toasting buns longer and searing burgers differently to make them juicier.
News by Bloomberg, edited by Hospitality Ireland