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New Offers And Store Revamp Helps Mcdonald’s To Beat Revenue Forecast

New Offers And Store Revamp Helps Mcdonald’s To Beat Revenue Forecast
A string of innovations implemented at stores of McDonald’s Corp such as upgraded stores and new promotions, such as the 2 for $5 Mix and Match deal, helped the company to attract more customers during the second quarter which in turn helped the largest burger chain of the world to beat quarterly sales expectations of analysts for the company established restaurants in the United States.
The news of the estimate beating performance of the company for the second quarter resulted in a hike of 2 per cent in the shares of the company – which are also a component of the blue-chip Dow Jones Industrial index. The share price touched a record high of $218.96 which marked McDonald’s to be the third major restaurant chain whose share prices hit a peak this week.
McDonald’s follows Chipotle Mexican Grill Inc and Starbucks Corp to report strong quarterly performance in terms of US sales numbers. Measures undertaken by McDonalds such as new menu additions, expanded delivery services and tech-enhanced stores, helped McDonalds to stage the strong performance.
“These three (companies) are using their operating scale and their business strength to essentially outflank smaller competitors and generate very strong sales growth and profit,” Telsey Advisory Group analyst Bob Derrington said.
In recent years, lower customer traffic has bogged down revenues of the US restaurant market. The industry is facing a string of challenges such as the entry of delivery services such as DoorDash and Uber Eats and the rising number of competitors among fast-food chains. This has forced established restaurant chains to seek out methods and tactics to attract and retain customers.
The United States is the largest market for McDonald’s and just like a number of its rival companies, has embarked on a strategy of remodeling its 14,000 restaurants in the US and introduced innovations such as digital ordering kiosks. The company has also upgraded its mobile app and had added pay and pickup services which have been successful for it in the international markets.
The menu and offering has also been changed by the company as it has added deals such as the $1, $2, $3 value menu as well as a wider variety of breakfast items such as Donut Sticks. The company has replaced many of its burgers comprising of frozen beef to fresh beef in order to further attract customers.
“Customers are rewarding us for the investments we are making,” Chief Executive Officer Steve Easterbrook said on a post-earnings call with analysts. “We’ve made significant progress on delivery the past 2 years,” he said, adding that delivery is expected to be a $4 billion business in 2019 for McDonald’s and its franchisees.
There was a 5.7 per cent growth in sales at U.S. restaurants open for at least 13 months which also marked the highest growth rate for the company since 2015 when it had launch its all-day breakfast.
According to IBES data from Refinitiv, analysts had forecast a 4.47 per cent growth.

Christopher J. Mitchell

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