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TwitterFast food giant and world’s biggest restaurant company, Mc Donald’s, today posted a 2.6% rise in the global same store sales in January. Perhaps taking a cue from the CVS Q4 results that came out yesterday, Mc Donald’s too, as a pleasant surprise, beat analysts’ expectations. Global sales were predicted to rise 2 percent, the average of estimates from analysts at Barclays Capital, Jefferies & Co. and Robert W. Baird. U.S. sales were projected to be unchanged.
A break up of the results reveals that sales at U.S. stores open at least 13 months fell 0.7 percent and climbed 4.3 percent in Europe, Asia, the Middle East and Africa also rose 4.3 percent. Last year, global same-store sales rose 7.1 percent in January, including gains of 5.4 percent in the United States, 7.1 percent in Europe and 10.2 percent in Asia/Pacific.
Mc Donalds will celebrate the rise in global sales
Mc Donald’s clearly seems to be bearing the brunt of the recession and consequent loss in purchasing power of the fast-food-tuned-American. High unemployment continues to plague the industry. More than that, lowered grocery prices encourage more and more people to eat at home.
Earlier this month, Mc Donald’s CEO Jim Skinner said that the weather affected their sales as well and that their revenues went down by as much as 3% on bad weather days. As such they expected the sales to stagnate or fall down slightly during the lull. Yet, the company surprised analysts in January by announcing a 1 percent increase in December U.S. same-store sales after two months of declines.
All the same, it introduced a $1 breakfast menu last month in the US and added a wrap version of its Big Mac sandwich to revive sales. They claim that McCafe coffee drinks and the premium-priced Angus Burger have also been their saving grace.
Longer working hours in UK and France drove sales in Europe (6.7 percent rise in total sales), while the demand for breakfast and core menu staples such as french fries boosted sales in Australia and Japan (7.2 percent increase in the rest of the world in total sales). Also, its free Wi-Fi is a draw. Sales were weak however, in Germany (in Europe) and in China, possibly due to the timing of the Chinese New Year.
It is evident that while grabbing the eyeballs of the cost conscious with one hand, Mc Donald’s is certainly not letting go off those who are feeling good about the recovery, by increasing its premium offerings at the same time. As the numbers will suggest, systemwide sales (which include sales at all restaurants, whether operated by the Company or by franchisees) were up 9.1% last month, or 4.3% on a constant-currency basis. (Constant currency results exclude the effects of currency translation and are calculated by translating current year results at previous year average exchange rates). Overall, it has still outperformed most of its competitors, who’ve increasingly been pushing value menus and discounts of their own.
It is important to note that these figures are considered a key indicator of a restaurant chain’s health because it excludes the effects of new restaurants and restaurant closings.
The stock market sentiment too, seems to be taking the hint. Shares shot up 1.1% at $63.59 in premarket trading. The stock through Monday’s close is up roughly 6.6% in the past year. They edged up 46 cents in to $63.38 in premarket trading.
Meanwhile, McDonald’s said on Tuesday that it expects to record $40 million to $50 million in charges in the first half of the year on plans by its McDonald’s Japan affiliate, in which it has a 50% stake, to close about 430 restaurants over the next 12 to 18 months.
“As we raise the bar on our menu, convenience and value offerings, I am confident that we will exceed our customers’ expectations again in 2010.” Said CEO Jim Skinner.
Yes, happy meals make happy deals.
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