McDonald’s gets sales lift from cheaper menu, McNuggets promotion

McDonald’s beat Wall Street estimates for third-quarter profit and sales on Monday, powered by new launches as well as steady demand for its cheaper burgers and fries from diners struggling with still-high food prices.

Shares of the company, which also raised its quarterly cash dividend by 10%, rose about 3% in premarket trading.

McDonald’s size and scale have helped keep its meals relatively more affordable even after the industry-wide hike in prices last year, helping counter the trend of inflation-hit consumers eating more at home and a broader decline in footfall.

Drawing on its history of menu enhancements, the burger giant launched the Cheesy Jalapeno Bacon quarter pounder in July and brought back the fan-favorite Spicy Chicken McNuggets to menus in September.

McDonald’s has done a “fantastic job” in returning to menu items that have performed well over time to boost sales and margins, Stephens analyst Joshua Long said.

The “Golden Arches remain resilient,” Long added.

While overall dining traffic fell throughout the quarter, McDonald’s saw a 7.3% jump in July, data from Placer.ai showed. Footfall strength at McDonald’s tapered off in the next two months but remained ahead of the broader industry trends.

Global comparable sales jumped 8.8% in the quarter ended Sept. 30, while analysts on average had expected a 7.36% rise, according to LSEG data.

“The value, the affordability, and just the consistency that the McDonald’s brand can bring to the consumer” would further fuel sales momentum in the rest of the year, Long added.

Total restaurant margins increased 12% to $3.84 billion in dollar terms as prices of proteins and vegetables trended lower, prompting the company to lift full-year margin expectations to 46% from 45% previously.

U.S. comparable sales climbed 8.1%, above estimates of a 7.4% increase, while same-store sales in its international operated markets also edged past expectations.

Adjusted per-share profit of $3.19 beat estimates of $3.00. – Reuters