McDonald's posts strong second quarter profit, names new chief of US operations
McDonald’s posted a strong profit in its second quarter and named a new head of the US market as sales in the U.S. continue to be impacted by Americans’ cautious spending
McDonald's posted a strong profit in its second quarter and named a new head of the U.S. market with sales at home under pressure as many Americans grow increasingly cautious about spending.
Same-store sales, or sales at locations open at least a year, edged up 0.8% in the U.S. That’s a sharp slowdown from the 2.5% increase a year ago, when the company had a big win with a meal tied to “A Minecraft Movie.” Global same-store sales rose 1.3%.
CEO Chris Kempczinski said during the company's earnings call on Tuesday that the U.S. performance was partly hurt by inconsistent execution across its restaurants and marketing programs that didn't meet expectations.
“We don’t have a strategy problem," he said. "We simply didn’t execute at the level we needed to in the second quarter.”
Another issue was a pullback on the number of digital offers that customers received, Chief Financial Officer Ian Borden said. Without those offers, customers either bought less, or didn't buy at all. McDonald’s plans to address this by launching more digital offers nationally, starting next week. The company is also looking to send more personalized offers to its most loyal users, he added.
McDonald's, like many restaurant chains, is dealing with American consumers that are keeping a close eye on their wallets. The company warned in May that high gas prices and consumer anxiety over the U.S. conflict with Iran could dent its sales. The U.S. average for regular gasoline reached its most recent peak on May 21 at $4.56 per gallon, according to AAA.
McDonald's has jostled its menu and tried to lure some cost-conscious customers to its restaurants through value meals and other specials. These items can be particularly important for low-income customers, who are hit hard by rising costs. In April, the chain introduced a simplified McValue menu, which has 10 items that cost $3 or less.
Kempczinski said that about a year ago, McDonald's got a bit off target on value, and that its base menu pricing began running higher than its competitors in many places. The company has since worked to bring its prices below or closer to competitors on items ranging from burgers to drinks.
For the three months ended June 30, the Chicago burger chain earned $2.36 billion, or $3.32 per share. A year earlier it earned $2.25 billion, or $3.14 per share.
Excluding one time charges and benefits, earnings were $3.38 per share, beating the $3.32 per share analysts polled by FactSet expected.
Revenue climbed to $7.1 billion from $6.84 billion in the prior-year period, but came a bit short of Wall Street's estimate of $7.13 billion.
McDonald's also announced Tuesday that Skye Anderson will be president of McDonald's USA.
Company shares rose less than 2% Tuesday.
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AP reporter Dee-Ann Durbin contributed to this report.
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