McDonald’s surpassed expectations with its global same-store sales in the third quarter, as announced on Wednesday, November 5th. The fast-food giant’s affordable meal options have successfully stimulated demand, despite consumers remaining cautious in their spending habits.
According to data compiled by LSEG, the global same-store sales of this hamburger chain increased by 3.6%, slightly higher than the analysts’ average expectation of a 3.55% growth. This growth was mainly attributed to strong performances in both the U.S. and international markets.
In an effort to combat high inflation and slowing foot traffic, fast-food chains including McDonald’s, Domino’s Pizza, and Taco Bell under Yum Brands have been rolling out more affordable meal combinations and limited-time offers, as reported by Reuters.
This move aims to retain consumers who are highly sensitive to prices due to persistent high inflation, slow wage growth, and rising menu prices. McDonald’s has maintained its $5 meal for over a year, while simultaneously prioritizing menu innovation and enhancing marketing efforts to regain demand from budget-conscious diners.
Ian Borden, Executive Vice President and Chief Financial Officer of McDonald’s, described the return of Snack Wraps as “the most popular new chicken product launch in recent American history” during the earnings conference call.
Since the reintroduction of Snack Wraps in July, nearly one-fifth of McDonald’s customers have purchased this product.
Analyst Peter Saleh from BTIG noted that demand surged in July with the launch of the $2.99 Snack Wrap, although the growth momentum slowed in August and September.
To continue its value strategy, the company reintroduced Extra Value Meals in September and began collaborating with franchisees to standardize and increase the national bundled meal discount from 10-11% to 15%.
McDonald’s also highlighted the tremendous success of its Monopoly promotion. After a 10-year hiatus, the game introduced “digital-game pieces” in the app, attracting approximately 45 million individual participants.
CEO Christopher Kempczinski described the game as “one of the largest digital customer engagement events in our history,” emphasizing how the promotion helped more customers discover McDonald’s value offerings.
Despite strong sales growth, challenges remain. According to Placer.ai data, McDonald’s experienced a 3.5% overall decrease in foot traffic from July to September, higher than the industry-wide decline of 2.3% in the fast-food sector.
Analysts caution that franchisees may struggle to maintain high discounts once the financial support provided by McDonald’s diminishes.
As of the quarter ending on September 30, same-store sales in McDonald’s largest market, the U.S., increased by 2.4%, compared to just 0.3% growth in the same period last year.
In the business segments operated by local partners, sales surged by 4.7%, primarily led by the Japanese market; international market sales increased by 4.3%, predominantly driven by Germany and Australia.
Adjusted net income for the quarter was $2.31 billion, or earnings per share (EPS) of $3.22, as compared to $2.32 billion, or $3.23 per share, in the same period last year.