McDonald’s Corp. showed the first big sign of progress in its turnaround effort, posting same-store sales growth in all of its markets, including its critical U.S. segment.
Shares surged to an all-time high Thursday, up 7 percent to $109.66 a share in early trading, as the company’s third-quarter profit and revenue topped Wall Street expectations.
The burger giant also reported same-store sales growth of 0.9 percent in the third quarter in the U.S., where it has been struggling. It marked the first quarterly same-store sales increase in the U.S. in two years and topped analysts’ projection of a 0.2 percent decline in the gauge.
McDonald’s attributed its U.S. sales growth to a new buttermilk crispy chicken sandwich, as well as increased breakfast sales driven by a recipe change to its Egg McMuffins, which now are made with real butter instead of margarine.
The fast-food chain in recent months has unveiled an array of changes to bolster operations in its home market, including streamlining its menu, allowing regional markets to develop their own products and placing greater emphasis on the quality and freshness of ingredients. The Oak Brook, Ill., company earlier this month also began offering breakfast all day, though the success of that effort won’t start to become clear until the company reports fourth-quarter earnings.
Same-store sales increases in the company’s overseas markets also exceeded expectations, with China showing a strong rebound from a supplier problem that hampered sales last year. Globally, same-store sales rose 4 percent, beating the 1.9 percent increase analysts had forecast, according to Consensus Metrix.
A longtime supplier was accused by Chinese authorities in 2014 of selling expired meat to McDonald’s and to Yum Brands Inc.’s KFC restaurants in China. Yum, which had been plagued by other quality problems in China as well as its own miscues, hasn’t yet recovered from the incident and on Tuesday announced plans to split its China business into a separate, publicly traded company. McDonald’s said its emphasis on value and breakfast contributed to its recovery in China.
Overall, McDonald’s reported net income of $1.31 billion, or $1.40 a share, up from $1.07 billion, or $1.09 a share a year earlier. Revenue fell 5.3 percent to $6.62 billion, but would have grown 7 percent excluding currency impacts.
Both profit and revenue topped estimates of analysts polled by Thomson Reuters, who had called for $1.27 a share in earnings on $6.41 billion in revenue.
McDonald’s said its operating profit fell 2 percent in the quarter, weighed down in part by investments in employee wages and benefits. The company in July began paying workers at its U.S. company-owned stores at least $1 an hour more than the local minimum wage.
CEO Steve Easterbrook said in a news release that he expects the company’s momentum to continue, with same-store sales expected to be higher in all regions in the current quarter.
“While still in the early stages, we believe our turnaround plan is starting to generate the change needed to reposition McDonald’s as a modern, progressive burger company,” said Easterbrook, who was elevated to CEO in March.
