McDonald's Defies Industry Downturn With Strong Sales, But China Challenges Persist

McDonald’s Corporation MCD shares are trading higher on Wednesday.

The company reported second-quarter adjusted earnings per share of $3.19, beating the analyst consensus estimate of $3.14. Quarterly sales of $6.843 billion outpaced the Street view of $6.682 billion.

Global comparable sales rose 3.8%, driven by a 2.5% increase in the U.S., a 4% gain in International Operated Markets (IOM), and a 5.6% uptick in International Developmental Licensed Markets.

Also Read: Yum! Brands Opens 871 New Restaurants While Navigating A Slower Quarter

The Wall Street Journal reported, citing Black Box Intelligence, that, amid cash-strapped consumers, U.S. restaurant traffic is down 1.8% year-to-date, with fast-food visits slipping 2.8%.

However, McDonald’s reported that comparable sales in the U.S. were primarily driven by positive check growth, and across International Operated Markets, every market delivered positive comparable sales.

International Developmental Licensed Markets saw gains led by Japan, with all geographic regions reporting improvements.

Consolidated revenues grew 5% (4% in constant currencies), while systemwide sales climbed 8% (6% in constant currencies).

Revenues from franchised restaurants rose 7% year over year to $4.213 billion.

Sales by company-owned and operated restaurants remained relatively flat year over year $2.458 billion.

Starting in September, McDonald’s will introduce new cold beverages at about 500 restaurants to attract younger consumers, The Wall Street Journal adds.

During the earnings conference call, McDonald’s CFO Ian Borden said the near-term macroeconomic environment in China remains challenging. He added that cost pressures have intensified in several markets, most notably across Europe.

He also noted that McDonald’s is working closely with U.S. franchisees to evaluate opportunities to improve core menu offerings.

Despite widespread inflation across most of Europe, McDonald’s CEO Chris Kempczinski stated that its IOM are being prudent about pricing actions. This approach has allowed the company to outperform its competitors in both comparable sales and comparable guest discounts.

He also mentioned that early results from the recently relaunched Snack Wraps are “encouraging”.

Price Action: MCD shares are trading higher by 2.37% to $305.84 at last check Wednesday.

Read Next: 

• KFC Betting $2 Billion On Britain’s Fried Chicken Boom

Photo by New Africa via Shutterstock