McDonald's beats sales estimates as value meals pull in cautious diners

McDonald’s beat estimates for third-quarter global comparable sales on Wednesday (Nov 5) 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 per cent, slightly ahead of analysts’ average estimate of a 3.55 per cent increase, according to data compiled by LSEG, driven by strength across its US 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 US$5 meal deal in place for more than a year, prioritised menu innovation and intensified marketing efforts to revive demand among low-income diners.

Demand spiked in July on the launch of the US$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 standardise a 15 per cent discount on combo meals nationwide, up from the current 10 per cent to 11 per cent.

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

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

Comparable sales in the US, its largest market, rose 2.4 per cent in the quarter ended September 30, compared with a 0.3 per cent rise a year earlier.

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

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