McDonald’s Q2 Profit, Sales Jump on Chicken Sandwiches, Promotions

McDonald’s (MCD) on Wednesday reported second-quarter financial results that beat Wall Street expectations, helped by the introduction of a new crispy chicken sandwich, digital incentives and promotional menu items that fueled rising consumer demand.

Here’s how McDonald’s performed this quarter, compared to Wall Street expectations, according to Bloomberg’s consensus estimates:

  • Gain: $5.89 billion versus $5.57 billion expected

  • Adj. earnings per share (EPS): $2.37 vs $2.11 expected

  • Sale in the same store: 40.5% vs 38.73% expected

The continuation of takeout trends from the COVID-19 era and specialty menu items that helped make the fast food chain an unlikely beneficiary of the pandemic kept McDonald’s rolling in the second quarter, but the initial stock reaction was flat in pre- market trading.

The results indicate strength in the company’s recovery efforts during the pandemic, which wreaked havoc in the food and restaurant space for most of last year as diners largely stayed indoors.

Still, McDonald’s — which relied heavily on drive-throughs and the digital experience that encouraged customer loyalty — has always been one of the bright spots in the industry. Currently, the stock is hovering near record highs.

“Our performance is an ongoing demonstration of the broad strength and resilience of our business as global comp sales grew nearly 7% in the second quarter from 2019,” said McDonald’s president and CEO Chris Kempczinski in the publication of the results.

“Clearly, our next chapter will be driven by our leadership in the digital world,” he continued.

However, the threat of the COVID-19 Delta variant looms large, both at home and abroad, where lengthy lockdowns previously hurt the same store’s sales abroad.

During Wednesday’s call, McDonald’s noted that the Delta variant reduces mobility in Australia and that France and Germany still have some indoor eating restrictions. In addition, the company expressed concern about the resurgence of COVID-19 in southern China, adding that comparable sales in the world’s second-largest economy have not yet returned to 2019 levels.

On Monday, the Golden Arches continued to invest in its customer-first strategy, with veteran Manu Steijaert being the first global chief customer officer. As value food and menu innovation help attract customers, Steijaert’s role will focus on improving the dining experience, both in person and online.

McDonald’s is leaning towards digital

The executive will lead the newly formed customer experience team effective August 1, and will also oversee all marketing, data analytics and digital customer engagement, as well as the brand’s first nationwide loyalty program.

The recently launched program, called MyMcDonald’s Rewards, allows customers to accumulate points and unlock free rewards for every dollar spent on qualifying purchases.

McDonald’s currently has 22 million loyalty members in the US, the company revealed during its earnings call, with plans to launch a rewards program in the UK and Germany.

It’s the brand’s latest push when it comes to improving the digital experience that also includes restaurant kiosks, digital menu boards at drive-throughs, McDelivery and the mobile app.

Taco Bell (YUM), Popeyes (QSR), Chipotle (CMG) and others have also launched new loyalty programs (or expanded on existing ones) to retain customers gained during the pandemic.

Plus McDonald’s new crispy chicken sandwiches and the star-studded Famous Orders campaign — recently featuring global pop icons BTS . were on display – also helped increase sales.

The celebrity special meal, which debuted May 26 in select countries including North America, Austria and Brazil, includes a 10-piece Chicken McNuggets, medium fries, soda, and—a first for U.S. consumers—a chili and cajun dipping sauce. , inspired by popular recipes from McDonald’s South Korea.

Investors look at revenue growth in the same store

McDonald's earnings on tap

McDonald’s earnings on tap

Same store sales in the US were up 25.9%, above expectations of 23.03%. Internationally, same-store sales growth improved exponentially, up 75.1% year-on-year, or 2.6% year-on-year

Increased foot traffic patterns at McDonald’s locations also seem to support the positive data.

According to a new report from the analytics company placer.ai, the Golden Arches is still on track for a full recovery from the pandemic, with foot traffic patterns approaching pre-pandemic levels, despite a slow start at the start of the second quarter.

In the week of July 12, McDonald’s saw its first year-over-two-year visit growth since the start of the pandemic with visits of 2.9%, compared to the same week in 2019, the analytics company noted.

July has proved to be the burger maker’s comeback month, as visits were still between 8% and 9% at the beginning of June from 2019.

Going forward, the company will continue to face challenges as customers have not yet reverted to pre-pandemic eating patterns, as evidenced by Placer.ai’s foot traffic data.

Another headwind is the continuing tightness in the labor market, as the restaurant sector in particular struggles to find workers. McDonald’s raised hourly wages in Mayby an average of 10%for more than 36,500 employees in more than 660 U.S. restaurants.

Alexandra is a Producer & Entertainment Correspondent at Yahoo Finance. Follow her on Twitter @alliecanal8193

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