Several changes in the classic McDonald’s menu benefited the company’s business by a surprising amount. Earnings this past quarter were higher than predicted with a global rise in same-store sales of 1.3 percent and an increase of growth of 4 percent.
The menu changes and promotions made by CEO Steve Easterbrook put McDonald’s ahead of competitors including IHOP and Sonic Corp. The fast food industry as a whole experienced a recent decrease in sales which McDonald’s is now overcoming.
U.S. markets have become increasingly difficult to succeed in for both McDonald’s and competitors as traffic diminished in the first quarter. Fast-food industry same-store sales fell by 0.6 percent in March continuing a 4-month trend of decrease.
In a successful attempt to regain ground Easterbrook implemented several menu changes. Drink promotions of $1 and $2 deals paired with new sizes for the famous Big Mac, the even bigger Grand Mac and the smaller Mac Jr., drew in customers without making dramatic changes which risk attracting controversy.
Menu changes are historically risky, especially with well-known and popular products. The 2015 recipe change of Diet Pepsi and the famously abysmal failure of Coca-Cola’s “New Coke” in 1985 are prime examples.
However, Easterbrook’s changes have been met with success as U.S. same-store sales rose by a surprising 1.7 percent last quarter. The period saw earnings of $1.47 per share beating the prediction by analysts of $1.34 per share.
The increase is partially due to a rise in prices of about 2 percent this year. Other factors, including the long-lasting effects of the all-day breakfast policy implemented in 2015, contributed to recent success.
The McDonald’s Corp.’s stock experienced a 10 percent gain over the past year as of Monday. The Standard & Poor’s 500 index conversely, climbed by only 6 percent.
The stock also experienced the biggest intraday increase since October 2015 to $141.99. This is a raise of 5.8 percent.
Changes in offerings overseas were also successful. Efforts to improve customer service in Canada and new menu items in the U.K. contributed to an increase in international sales. McDonald’s leading international markets rose by 2.8 percent.
Additionally, an increase in store openings in China contributed to sales. Efforts are being made to compete with KFC and Pizza Hut stores owned there by Yum China Holdings Inc.
About two-thirds of total revenue for the company are brought in by overseas markets so success in these areas is of key importance. The high-growth division reported a rise of 3.8 percent in same-store sales surpassing the predicted 2.7 percent.
The chain’s total revenue last quarter was $5.68 billion which is higher than the average projected revenue by $150 million. Easterbrook plans to keep revenue rising through exploring digital options and delivery services.
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