McDonald’s serves up supersized Q3 results

Global franchise giant, McDonald’s has reported its 13th consecutive month of positive same-stores sales, exceeding third quarter revenue expectations and topping Wall Street profit.

The company’s shares rose by more than two per cent, up to $US2.10, despite a major U.S. market sell-off before the opening bell on Tuesday.

The share price rise was 12 U.S. cents higher than industry analysts had predicted, according to a survey from Zacks Investment Research, and was buoyed by the company’s $US1.64b earnings.

The latest results are encouraging for McDonald’s, with the brand continuing its efforts to convert many of the company-owned outlets in the U.S. to franchises, a trend that was expected to greatly reduce revenue.

While still down on results for the same period last year, McDonald’s generated revenue of $US5.37b, which Neil Saunders, managing director of GlobalData Retail says is a reasonable result.

“Putting to one side the decline in revenue, which is a function of McDonald’s transferring company-owned restaurants into franchises, this is a reasonable set of results for the burger giant,” Saunders said.

“Overall comparable sales growth is solid, with both the U.S. and international divisions contributing to the uplifts.”

The positive results relieve some of the pressure for the U.S. arm of McDonald’s, with franchisee concerns over sales growth reportedly coming out of the country, however, Saunders suggests the noise is a reflection of the conversion and innovation process.

“McDonald’s is going through a period of change and part of this involves updating stores, the offer, and operations in order to allow the company to perform in a more competitive marketplace,” Saunders said.

“Unfortunately for franchisees, the financial and operational burden of some of this change falls on them.This is a price that they are willing to pay so long as they see results in the form of better sales and profits.”

Same-store sales for McDonald’s Corp rose by 2.4 per cent, just shy of most estimates, and while shares are still down three per cent this year, this just-ended quarter saw a bounce-back of almost five per cent.

Author: AAP, Inside Franchise Business