McDonald’s shares hit a new all-time high today after the company reported a strong first quarter performance helped by cost-cutting and international sales figures holding up better than expected.
Overall sales fell for the eleventh consecutive quarter but shares still climbed to $141.12 as the figures easily beat market expectations.
Although year-on-year revenue fell to $5.7bn (£4.4bn) in the quarter ended 31 March, a 3.9 per cent drop, analysts had predicted revenue of around $5.5bn. The company’s net income rose by eight per cent to $1.2bn as it managed to reduce its operating costs by a 10th.
McDonald’s said that its operating income in the US business had increased by 13 per cent and that its first quarter comparable sales had risen by 1.7 per cent, benefitting from the launch of the All Day Breakfast. The company added that overall sales had been bolstered by strong performances in its international division by the UK and China. Comparable sales in its established markets and high growth divisions were 2.8 per cent and 3.8 per cent, respectively.
Why it’s interesting
The company revealed its turnaround plan two years ago after its profits started to shrink due to the arrival of gourmet fast food outlets such as Five Guys and In-N-Out Burger. Chief executive Steve Easterbrook was brought in to firefight the decline and the Watford-born boss unveiled a new ‘Global Growth Plan’ to investors last month.
The long-term plan focuses on embracing technology with self-service machines already being rolled out in McDonald’s restaurants across the UK. The company said that it is also looking into how it can take advantage of the rapid rise in the use of third party online delivery firms such as Deliveroo and UberEATS.
What McDonald’s said
“There's a sense of urgency across the business as we take actions to retain existing customers, regain lapsed customers and convert casual customers to committed customers,” said Easterbrook on the results.
We're challenging ourselves to identify and pursue initiatives that can bring the biggest benefit to the most customers in the shortest possible time.
I'm confident that we're on the right path and well-positioned to unlock incremental growth and deliver against our Velocity Growth Plan for 2017 and beyond.
McDonald’s revenue continues to decline but international sales growth is slowing the fall and profit margins are improving thanks to cost-cutting.