McDonalds shares rise on better-than-expected Q1 results

McDonalds shares rise on better-than-expected Q1 results

McDonalds shares closed higher in the US Monday after the fast food chain reported a stronger first quarter performance than had been expected. The well-known restaurant chain’s turnaround plan appears to be working and the decision to raise prices across US stores hasn’t put customers off.

McDonalds shares ended the US Monday trading session 5.77% higher at $167.44. The stock is also marginally in the green in pre-market trading.

McDonalds performance

Net income at McDonalds rose 13% on a global, comparable basis, while sales grew 7%. The number of global customer visits, meanwhile, increased by 0.8%.

However, while revenues were 9% lower in Q1 2018 than a year earlier, the business said that was due to the decision to focus more on expansion through franchise, rather than opening and managing its own new restaurants.

“We continued to build upon the broad-based momentum of our business, marking 11 consecutive quarters of positive comparable sales and our fifth consecutive quarter of positive guest counts,” said McDonald's President and Chief Executive Officer Steve Easterbrook.

“More customers are recognising that we are becoming a better McDonald's, appreciating our great tasting food, fast and friendly service and compelling value as we execute our Velocity Growth Plan,” Easterbrook added.

Menu changes impress customers

McDonalds has lost out on customers to increased competition, particularly around the breakfast menu. However, the American fast food firm has hit back with some changes of its own. And, despite some trepidation among some franchisees, those changes appear to be working.

In the US, McDonalds has introduced premium burgers countrywide and is charging higher prices for those items. Its prices are similar to those in the better-burgers market, sold by competitors such as shake Shack and Five Guys have been well received by customers.

The dollar menu continues to impress. While the food chain has increased some prices, it has also extended its dollar menu and offers items priced at $1, $2 and $3. And, according to Chief Financial Officer Kevin Ozan, customers who use the dollar menu tend to buy more items than others.

“When people use $1, $2, $3 Dollar Menu, the items per transaction in those transactions is higher than our average when people don’t use that $1, $2, $3 Dollar Menu,” Ozan said on an earnings call.

By Ilona Billington
Ilona is a freelance writer and editor with over 15 years experience reporting and writing about UK and European economics, real estate, financial markets and central banks.
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