Turnaround at McDonald’s Gaining Momentum
- Updated: April 23, 2016
The turnaround at McDonald’s Corp is showing more signs of gathering momentum helped by the decision last October of all-day breakfast, new value meals and commodity prices that were lower, even as costs of labor and other headwinds remained.
The fast food burger chain posted an increase of 6.2% in sales of same stores during the recently ended quarter, which is the best performance for four years. Earnings also topped estimates made by analysts.
The latest results are more evidence that the plan installed by Steve Easterbrook the CEO to revive the largest chain of restaurants in the world has gathered steam.
Since he took over just over one year ago, Easterbrook has revamped ordering at the drive-thru, adjusted operations in the kitchen area and eliminated a number of items from the menu.
Sales in the U.S. have also been rekindled thanks to adding breakfast to the menu all-day starting last October and the new two for $5 and two for $2 McPick Deals.
Regardless of the number showing improvement, challenges still remain for the fast food king. Revenue companywide declined during last quarter, which is the seventh consecutive drop and higher costs of labor have pressured its profit margins.
McDonald’s is also embroiled in a huge dispute with the U.S. National Labor Relations Board due to whether workers at its many franchised restaurants can qualify as a company employee, which is a change that could threaten to upend it new business model.
Shares at McDonald’s, which were up by 2.1% early in the day, were little changed amidst a broader decline amongst stocks in the U.S.
McDonald’s has gained over 6.5% during 2016 through the close of business on Thursday. That compares to an advance of 2.3% by the S&P 500.
While McDonald’s revenue has fallen, to over $5.9 billion during the quarter, it beat the analyst’s projections of $5.81 billion. Analysts were expecting they would have earnings of $11.6 for the company.
Profit has been boosted from lower prices on ingredients like beef and the trend is continuing.
McDonalds gets close to two thirds of its revenue from locations overseas, also is searching out ways to draw diners into their new foods and deals.
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