McDonald’s All-Day Breakfast Is Driving Sales, but the Company Needs Another Hit
The home of the Big Mac reported its third-quarter sales today, and investors are lovin’ it. McDonald’s shares rose more than 2 percent after the company announced sales at restaurants open for at least a year jumped 3.5 percent—far better than the 1.5 percent that was forecasted. Sales were particularly strong in Japan, while in China, amid political turbulence over the country’s claims in the South China Sea, sales declined. In the US, where the fast food industry has been struggling, the sales increase of 1.3 percent was relatively tepid. Earnings and revenue, meanwhile, are still down compared to the same time last year, but McDonald's President and CEO Steve Easterbrook sees the report as a sign the company is moving in the right direction.
“Our third quarter results, including our fifth consecutive quarter of positive comparable sales across all segments as well as improved restaurant profitability, are a testament to the progress we are making to satisfy the needs of today's dynamic customers,” Easterbrook said in a press release.
There had been some concerns that the sales spike resulting from the introduction of the highly successful McDonald’s all-day breakfast last year couldn’t continue much longer. According to Business Insider, some franchise owners felt all-day breakfast was “gimmicky” and merely a “Band-Aid to help us get through the next couple of quarters." But breakfast at McDonald’s, which expanded last month with a new nationwide menu that included the beloved McGriddle, seems to be going strong. According to the company, breakfast was, in large part, responsible for US sales growth, along with the McPick 2 menu and the introduction of Chicken McNuggets with no artificial preservatives.
Still, some analysts are predicting bumpy times ahead for McDonald’s. While service speed and order accuracy has improved, Morningstar’s R.J. Hottovy told CNBC the company needs to focus on coming up with another major idea to get customers excited and drive sales.
“The market's going to be looking for that next catalyst, whether it be another big product innovation or an update on the refranchising efforts which is going to transform their income statement and make it a much more asset-light and higher-margin company," Hottovy said.