McDonald’s says Cheap Eats Helped Lift Sales
Cheap eats and new menu items helped McDonald’s boost a key sales figure in May, bouncing back from a decline the previous month.
The world’s biggest hamburger chain said Monday that global sales rose 2.6 percent at restaurants open at least a year, helped by an extra Friday in the month. In the U.S., the figure rose 2.4 percent, as the Dollar Menu and its new chicken wraps and egg white breakfast sandwiches lifted results.
In Europe, the figure rose 2 percent, as declines in Germany and France were offset by strong results in the United Kingdom and Russia.
The figure edged up 0.9 percent in the region encompassing Asia, the Middle East and Africa. The company, which as more than 34,000 restaurants around the world, noted that results in China were negative because of fears about avian flu.
McDonald’s Corp. based in Oak Brook, Ill., has been struggling to increase sales as it faces changing eating habits and weak growth in the broader restaurant industry. Late last year, the company reported a decline in the monthly sales figure for the first time in nearly a decade. Soon after, it ousted the head of its U.S. division and renewed its focus on value and refreshing its menu.
McDonald’s is facing battles on different fronts. It’s fighting for price-conscious customers, but it’s also trying to cater to those who want healthier, fresher choices. In response, it has been rolling out menu changes that aim to attract different customers. Although prices vary in different markets, the menu items can range from $1 for a grilled onion cheddar burger to $7.79 for a grilled chicken sandwich with a drink and fries.
Specifically, the company is trying to attract customers by touting its Dollar Menu and other promotions, such as two Big Macs for the price of one. Some analysts say the strategy is bad for profit margins but the company says it’s necessary to steal market share, given the weak growth in the broader restaurant industry.
Its aggressive focus on value has forced competitors to respond. Burger King and Wendy’s, which had been working on improving the image of their food, have switched gears to step up marketing on deals. Subway, which is privately held and doesn’t report sales figures, also recently introduced a deal for a $4 lunch combo.
Even as they tout cheap eats, however, traditional fast-food chains including McDonald’s are trying to change the image of their food to reflect shifting eating habits. McDonald’s chicken wraps, which were introduced in late March, are intended to attract people in their 20s and 30s who want fresher foods. The wraps should cost around $4 a piece and help boost margins, following the introductory period during which chains typically offer steep discounting.
McDonald’s is also taking a small step toward offering breakfast items outside of its usual breakfast hours. Starting this month, the fast-food chain says participating 24-hour restaurants in select locations will offer an "After Midnight" menu that includes its Egg McMuffin, Big Mac and Chicken McNuggets.
CEO Don Thompson, who took over the top spot last summer, has also said the company has a bigger pipeline of new menu items planned for the year. The chain has increased the frequency of its limited-time offers to keep its menu fresh.
For May, McDonald’s noted that it benefited from one less Tuesday and one more Friday. Fast-food chains generally rake in more sales on weekends. The positive impact ranged from 0.6 percent to 1.4 percent, depending on the region.
The global sales figure, which came in higher than any of reported regions, was lifted by Canada and Latin America, which are reported separately. The figure is a key metric because it strips out the impact of newly opened and closed locations. It’s a snapshot of money spent on food at both company-owned and franchised restaurants and does not reflect corporate revenue.
Shares of McDonald’s were up almost 2 percent or $1.47 to $99.75 on Monday.