McDonald's profits jump as it taps tech for deliveries

John Biers, Agence France-Presse

Posted at Oct 25 2017 08:27 AM

The logo of a McDonald's Corp restaurant is seen in Los Angeles, California, US October 24, 2017. Lucy Nicholson, Reuters

NEW YORK - McDonald's turned in another strong round of earnings Tuesday following heavy promotions in the US as it ramps up tech-focused home-delivery and mobile pay initiatives.

The fast food giant scored a solid 6 percent jump in global comparable sales, fueled by gains in several key markets, including the United States, China, Britain and Canada.

"We're building a better McDonald's and winning back customers," said chief executive Steve Easterbrook, who was appointed in 2015 and has been credited with turning around the chain and dousing worries about rival chains and growing consumer enthusiasm for healthier fare.

Net income for the quarter ending September 30 was $1.9 billion, up 47.7 percent from the year-ago period. That included a gain of about $850 million from the sale of China and Hong Kong businesses to franchising companies.

Revenues fell 10.4 percent to $5.7 billion due to the divestments in Asia.

Easterbrook has been praised for successful roll-outs of the chain's popular all-day breakfast option and other new programs, and with efforts to simplify the menu in order to speed visits for customers.

The British-born chief has also reorganized McDonald's international divisions and aggressively pursued store refranchising that has raised funds that have helped to offset the costs of technology investments and higher spending on salaries and worker training.

US sales were lifted by some aggressive discounting initiatives, including the McPick 2 value deal, which charged $5 for 2 meal-sized items, such as the Big Mac and Chicken McNuggets.

Comparable sales in the US rose 4.1 percent despite lower sales in regions hit by Hurricanes Harvey and Irma.

The results "are a testament to both (McDonald's) resilience and the soundness of its reinvention strategy," said Neil Saunders, managing director of GlobalData Retail.

"Promotional activity has been key to McDonald's success within the US," Saunders said.

"While such activity is not new and helped to drive trade during the second quarter, we are encouraged that it still has resonance given the recent increase in the number of offers and deals from fast food rivals."

MCDONALD'S ON DEMAND

Easterbrook said he had been encouraged by early efforts on home delivery in the US, currently available at 3,700 restaurants, with a target of 5,000 by the end of the year. 

He said the service was a "meaningful contributor" to sales at participating restaurants because there are many return customers. 

"Given consumer trends, we can already see it growing," said Easterbrook. "We were a little late to enter, but I think we've entered with more muscle and intent than probably most other competitors could probably muster."

McDonald's is also eyeing growth through greater use of mobile ordering and curbside pickup. The program currently has about nine million active users on a monthly basis, said Chris Kempczinksi, president of McDonald's USA.

The chain is focused on training employees "to really understand when a curbside order comes up, how do they take that order? How do they go out and bring that food to the customers?"

The objective is to have the service running effectively by the time it begins publicizing the service in 2018, he added.

"We want to make sure that when we do flip on the marketing switch, we're ready to handle the business," Kempczinksi said.

Shares of McDonald's rose 0.8 percent to $164.67 in afternoon trading.

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