McDonald’s on Friday reported same-store sales growth that topped estimates, as promotions and store upgrades pay off for its U.S. business.
Shares of the company are on pace to open at an all-time high after jumping 2% in premarket trading. The company’s stock, which has a market value of more than $165 billion, is up 20% so far this year.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.05, adjusted, vs. $2.05 expected
- Revenue: $5.34 billion vs. $5.33 billion expected
- Global same-store sales growth: 6.5% vs. 5.1% expected
The Chicago-based company reported fiscal second-quarter net income of $1.52 billion, or $1.97 per share, up from $1.50 billion, or $1.90 per share a year earlier.
Excluding items, McDonald’s earned $2.05 per share, in line with estimates by analysts surveyed by Refinitiv.
Net sales for the quarter were flat. The company reported revenue of $5.34 billion, topping expectations of $5.33 billion. Stripping out the impact of currency, revenue rose by 3%. McDonald’s refranchising initiative once again hit sales this quarter. Selling corporate-owned stores to franchisees helps the company cut costs but hurts reported revenue because of accounting differences.
U.S. same-store sales grew by 5.7%, well above analysts’ expectations of 4.5%. The company attributed the growth to successful deals like its 2 for $5 Mix and Match promotion and positive impact from its tech-focused store renovations. The restaurant chain also said that its core menu items, which includes Big Macs and Quarter Pounders, continued to sell well in the U.S.
McDonald’s plans to spend about $1 billion in fiscal 2019 to modernize its American stores with self-order kiosks and other upgrades in the hopes of imitating the success it has seen abroad with tech-focused renovations. The company is also trying to drum up sales by expanding its delivery footprint. McDonald’s said earlier this month that it’s adding DoorDash as a delivery partner, ending its exclusivity with UberEats.
The global fast-food chain also saw strong same-store sales growth outside of its home market. In its international stores owned by the company, sales at stores open at least 12 months increased by 6.6%, primarily driven by the performance of the U.K., France and Germany. In international markets operated by franchisees, same-store sales grew by 7.9%.
McDonald’s said that it expects commodity costs for its five leading international markets — France, Germany, Australia, the U.K. and Canada — to become more expensive in fiscal 2019 than previously forecast. It raised its outlook for commodity cost increases to 2.5%, up from 2%.
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