McDonald’s Sales Improves With Smoothies
August 25th, 2010Author: Door WackoCited: Reuters
McDonald’s was helped by a new summer drinks, Smoothies, in the United States and longer hours in Europe to beat Wall Street forecasts for July as well as lifting their shares higher than ever. According to McDonald’s, global sales at restaurants that had been open for 13 months rose 7% in July which is better than analysts expectations for an increase closer to 5%.
The strong sales show McDonald’s is succeeding in reinventing its menu and image, winning new diners in a weak economy that has hurt rivals, analysts said.
“Over the last several years, they’ve been very successful at improving the quality of their food,” said Stifel Nicolaus & Co analyst Steve West. “They’ve really invested in their brand.”
While U.S. high unemployment persists, the fast food company’s appeal to families and retirees has helped it steal market share from chains like Burger King (BKC.N) and KFC, which is owned by Yum Brands Inc (YUM.N).
“McDonald’s has more broad-based appeal. They’re not as exposed to single white males,” West said, noting that group has been particularly hard-hit by the economy. “McDonald’s is appealing to soccer moms. They’re appealing to high-end consumers.”
U.S. sales, which account for about 35% of the company’s business, benefited from the introduction of Real Fruit Smoothies and Frappes from its McCafe line of drinks.
A record-setting heat wave in parts of the country and an extra Saturday in July also fueled the 5.7% rise in U.S. same-restaurant sales, said Edward Jones analyst Jack Russo.
Shares of McDonald’s were up 1.5% at $72.85 in afternoon trading on the New York Stock Exchange. Earlier in the session, the shares reached $73.33, an all-time high since the chain went public in 1965 at $22.50 per share. Burger King rose 1.1% while Yum gained 1%.
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EUROPE, ASIA ON THE RISE
In Europe, same-restaurant sales rose 5.3%, led by gains in France, Britain and Germany. McDonald’s has been renovating restaurants and extending hours in the region, which was the largest revenue contributor last year at 41%.
Same-store sales rose 10.1% in the Asia/Pacific, Middle East and Africa area. The company said Japan, Australia and China were standouts. Nearly 8,500 of McDonald’s 32,500 restaurants are located in that region, which contributed nearly 20% of its revenue in 2009.
McDonald’s plans to double its network in China to more than 2,000 outlets by 2013.
System wide sales rose to 6.8% or 8.3% on a constant currency basis.
McDonald’s said last month that the U.S. roll-out of espresso-based coffee and other high-margin drinks like Frappes had exceeded the company’s goal of adding $125,000 of sales per unit.
By expanding its business in the beverage area, McDonald’s was seen as attacking the core business of copy shop chain Starbucks Corp (SBUX.O). However, both companies appeal to different customers where beverages are concerned.
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My Take: The one thing I like about McDonald’s is it their community conscience. They hope local schools get kids desks and other school furniture they are in need of like whiteboards. They also help needy kids and kids who have terminal illnesses. The one thing I do not like about McDonald’s and that they used too much lettuce on their big Macs!
I have even seen some of the kids meals come with tooth brush and toothpaste to help encourage the kids to brush regularly. That way they don’t have to go to Virginia dentist and get cavities taken care. I do not know if this is true or not but I heard recently that McDonald’s help a kid who had a cleft palette by paying a South Riding VA cosmetic dentist to repair it.
So, McDonald’s has improved sales with new drink “Smoothies”. That is great because they spend some of those millions of dollars on people who really need it. And yes, I do you think macula once while with their delicious french fries.
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