McDonald’s boosts sales from cheaper menu, new releases

Oct 30 (Reuters) – McDonald’s ( MCD.N ) beat Wall Street estimates for quarterly results on Monday, driven by new releases, promotions and demand for affordable burgers and fries from diners struggling with even higher prices for food and essentials.

Shares of the company opened 2% higher as full-year margin expectations were raised as prices of commodities such as vegetables and proteins eased.

McDonald’s size and scale have helped keep its food relatively more affordable after last year’s industry-wide price hikes, helping it counter inflation-hit consumers’ tendency to eat more at home and a broader decline in footfall.

After testing in markets like Germany, the company rolled out its smaller, more affordable meal packs containing its core menu items to other markets.

“Consumers continue to be discriminating about what and where they spend…(but) in terms of customer acceptance…we see no change in pricing,” CEO Chris Kempczynski said in a post-earnings call. .

In fact, McDonald’s posted traffic growth among lower-income consumers, even as industry-wide numbers declined, Kempczynski said.

Drawing on a history of menu enhancements, the burger giant introduced the Cheesy Jalapeno Bacon Quarter Pounder in July and brought fan-favorite Spicy Chicken McNuggets back to the menu in September.

McDonald’s has done a “fantastic job” of returning to menu items that have performed well over time to boost sales and margins, Stephens analyst Joshua Long said.

Global comparable sales rose 8.8% in the third quarter ended Sept. 30, while analysts on average had expected a 7.36% rise, according to LSEG data.

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“The value, affordability and consistency that the McDonald’s brand can bring to consumers” will further fuel sales momentum later in the year, Long added.

US comparable sales rose a better-than-expected 8.1%, while same-store sales in its international operating markets edged past estimates.

Adjusted earnings per share of $3.19 beat estimates of $3.00.

Reporting by Deborah Sophia in Bangalore; Editing by Sriraj Kallu

Our Standards: Thomson Reuters Trust Principles.

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