Financial Performance

McDonald’s Serves up 5.5% Comp Sales Gain

The fast-food giant benefited in Q1 from menu price increases that fueled higher check averages in the U.S.
Matthew HellerMay 1, 2018
McDonald’s Serves up 5.5% Comp Sales Gain

Pricier burgers fueled strong quarterly same-store sales growth for McDonald’s, which also benefited from another increase in customer traffic.

With commodity prices going up, particularly for food, restaurant chains have been increasing prices to keep their profits up. On Monday, McDonald’s said its menu price increases fueled higher check averages in the U.S., leading to a 2.9% increase in same-store sales for the first quarter. Global comp sales were up 5.5%.

“In the U.S., first quarter comparable sales [were] driven by growth in average check resulting from menu price increases and product mix shifts,” the company said.

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According to CFO Kevin Ozan, sales were boosted by customers opting for McDonald’s premium products, its pricier Signature Recipe Burgers, and an increase in the number of items ordered at one time, particularly from its Dollar Menu.

The number of customers visiting McDonald’s stores rose 0.8%, the fifth straight quarterly increase in traffic. Excluding items, the company earned $1.79 per share on $5.14 billion in revenue, easily beating analysts’ estimates of $1.67 per share on revenue of $4.98 billion.

“This quarter once again demonstrated the global strength of the McDonald’s brand and the momentum the brand is enjoying,” Peter Saleh, analyst at BTIG, wrote in a research note.

McDonald’s has made several major changes to win back the more than 500 million visits it lost since 2012, including revamping its menu, renovating its stores, offering mobile and kiosk ordering, and partnering with UberEats to test delivery.

New menu items that have been a hit with customers inclued kale salad, a burger with Sriracha sauce, and fresh beef in Quarter Pounders.

McDonald’s also rolled out its $1 $2 $3 Dollar Menu in January. Some U.S. franchisees have expressed concern that this and other promotions would drive checks lower, but CEO Steve Easterbrook said customers who use the menu tend to purchase more items than people who do not order from it.

“We believe McDonald’s investment in [its new restaurant design], coupled with its new value platform and food quality initiatives will help the concept recover its 500 million lost transactions,” Saleh said.