uploads/2015/10/Same-Store-Sales-Growth-by-Markets-2015-10-231.jpg

McDonald’s US and Lead Markets Shine but China Returns with a Bang

By

Updated

Renewed focus

In the previous part of this series, we saw that McDonald’s (MCD) global same-store sales growth came in at an impressive 4% in 3Q15. Much of this growth is due to McDonald’s turnaround plan. It regrouped its global markets into four categories as we saw earlier.

Article continues below advertisement

The 80%

  • In 3Q15 quarter, the US Market and International Lead Markets contributed the most to McDonald’s same-store sales growth.
  • US-market same-store sales turned positive at 0.9% in 3Q15 from -3.3% in 3Q14.
  • In this market, McDonald’s removed some of the items from its menu, enabling greater efficiency in the kitchen to improve throughput. This is something Chipotle (CMG) has always focused on.
  • McDonald’s also simplified its drive-through menu boards, making it more convenient for customers to select items and place an order. According to the company, 70% of its sales in the United States come from the drive-through orders.
  • McDonald’s deployed its mobile app, which the company claims has over 2 million downloads and about 1.5 million offers redeemed.
  • Same-store sales growth in the International Lead Market was 4.6%. The comparison with the prior year is not available.
  • Growth came primarily from Canada, the United Kingdom, and Australia while France was in the negative.

Currently, McDonald’s forms about 0.3% of the First Trust Consumer Discretionary Alpha Fund (FXD).

The remaining 20%

  • Same-store sales growth in the High Growth Market stood at 8.9%. In the Foundational Markets, it stood at 6.1% in 3Q15.
  • China and Russia are key markets under the umbrella of High Growth Market. But most of the same-store sales growth in this region came from China’s 26.8% growth.
  • China has been troublesome for Yum! Brands (YUM), which recently missed its earnings expectations. Starbucks (SBUX) also has significant exposure to China.

For the future

Offering what customers want is the quickest way to attract customers, and McDonald’s (MCD) did just that this past quarter. On October 6, McDonald’s (MCD) launched all-day breakfast in the US market. When McDonald’s increases items on its menu, it stresses the kitchen. But under the new leadership, the company is all about simplification. According to the CEO, the company added all-day breakfast nationwide but also removed complex items from its offerings.

Advertisement

More From Market Realist