McDonald's Corporation today reported its results for the second quarter ended June 30, including a 3.7 percent increase in global comp sales.
Broken down by segment:
- McDonald's U.S. generated comp sales growth of 3.6 percent, leveraging its everyday value offerings, menu variety and reimaged restaurants;
- Europe's comp sales were up 3.8 percent behind value options balanced with premium product introductions and reimaged restaurants;
- Asia/Pacific, Middle East and Africa (APMEA) posted a modest comp sales increase of 0.9 percent. Solid performances in Australia and China were offset by a still-recovering Japan.
Heading up his first earnings call since taking over as CEO, Don Thompson noted McDonald's continued solid performance despite a slowing global economy and stronger headwinds on both the top and bottom lines. The company will continue to focus on its Plan to Win and three strategies: optimizing the menu, modernizing customer experience and broadening accessibility.
Thompson said the U.S. system continues to build sales and guest counts, albeit at a slower pace because of increased competition from convenience store and grocery segments, as well as the fast casual segment.
"For us, we just need to remain focused on what is in our realm of control. That is beverages, premium products, breakfast, promotional food events like the Chicken McBites and value," he said. "We just need to make sure we're appealing to customers more and focus on our business plan."
The breakfast daypart continues to experience strong momentum, as do beverages and value promotions. For example, a recent focus on the 20-piece Chicken McNugget offering helped increase total sales of chicken by nearly 11 percent versus the same period last year.
Thompson said customers can expect several new beef and chicken products within the next year, including wraps and premium sandwiches such as the pub burger, as well as additional innovations in the beverage and breakfast spaces.
The United Kingdom and Russia delivered strong sales for McDonald's during the quarter, and the U.K., France and Spain systems have gained market share to drive Europe's overall performance. Thompson said the company is re-engineering its 2012 plans to drive traffic in Europe, including a stronger focus on value and promotions and the expansion of breakfast and beverages.
In France, McDonald's plans to increase its media spend to strengthen its voice. And in Germany, the chain will continue to step up its value messaging, which has contributed to strong sales and guest counts.
Thompson said the company is witnessing fragile consumer confidence in Australia, as well as a difficult economy and continued disaster recovery in Japan.
In China, tier I cities are experiencing an economic slowdown and competition has increased. Still, McDonald's is on track to open 225 to 250 new restaurants this year while focusing on conveniences like McDelivery and dessert kiosks. Also, the company will continue to add to breakfast, the fastest growing daypart, which now represents more than 9 percent of sales in the country.
In response to all APMEA activity, the company has introduced value platforms to build traffic short term, with the objective of maintaining that traffic long term while building tickets as customers trade up.
"Let me be clear: we're not satisfied. But we have a resilient business model, a talented system, and experience in every type of operating environment," Thompson said. "We understand what we are facing – from the macro economic environment to increasing competition. We've been in these situations before and we'll draw on that experience and stay focused on the things that differentiate us."
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