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McDonald’s Same-Store Sales Growth Beat Analysts’ Expectations

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McDonald’s 4Q15 performance

Adopting a reorganization strategy yielded the desired results for McDonald’s (MCD). Each of the segments reported positive same-store sales growth. For 4Q15, the company recorded same-store sales growth of 5%.

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Segment wise same-store sales growth

Management said that the steps taken to enhance the menu quality, simplify operations, and offer convenience to customers in the third quarter set the tone for the fourth quarter. The introduction of all-day breakfast built on the momentum. Same-store sales growth of 5.7% was recorded in the US compared to -1.7% in 4Q14. Although the introduction of breakfast items like the Egg McMuffin and Hash Browns increased the average check, the traffic was still in negative territory.

International markets

The international lead markets segment recorded 4.2% growth—compared to 1.3% in 4Q14. It had strong performances from the United Kingdom, Australia, Canada, and Germany. In the United Kingdom, the average check was driven by successful promotions featuring premium products like the Chicken Legend and the new Big Flavour Wraps. In Australia, the deployment of “Experience of the Future” like self-order kiosks and table service as well as the introduction of all-day breakfast in 300 restaurants led the growth.

In the high-growth segment, China led the growth. It recorded same-store sales growth of 4%. As a whole, the segment recorded 3% growth compared to -4.2% in 4Q14. The foundational markets and corporate segment recorded same-store sales growth of 5.9% compared -0.1% in 4Q14.

You can gain exposure to McDonald’s by investing in ETFs like the Consumer Discretionary Select Sector SPDR ETF (XLY). XLY invested more than 5% of its portfolio in McDonald’s. It also has holdings in Starbucks (SBUX), Yum! Brands (YUM), and Chipotle Mexican Grill (CMG).

Outlook

To improve customer traffic in the US, McDonald’s is testing the “McPick2” value offering. It gives customers the flexibility to bundle two items of their choice at an attractive price. In international lead markets, the company is focusing on extending the conversion of restaurants to provide “Experience of the Future” convenience. This includes modern in-store service platforms like self-order kiosks, a customized order pickup place, and digital merchandise. Along with these initiatives, the company also planned for engaging marketing campaigns in high-growth markets as well as foundational markets and corporate to achieve positive same-store sales growth in 2016.

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