McDonald’s 1st-Quarter Results Beat on Price Hikes, More Visits

McDonald’s 1st-Quarter Results Beat on Price Hikes, More Visits
Customers eat dinner at a McDonald's store in Beijing, China, on Jan. 9, 2017. Jason Lee/Reuters
Reuters
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McDonald’s Corp. beat Wall Street expectations for quarterly global comparable sales and profit on Tuesday, boosted by higher menu prices and more customer visits.

The burger chain’s shares rose about 1 percent in premarket trading, as comparable sales jumped by 12.6 percent for all of McDonald’s geographical segments.

Global comparable sales also climbed 12.6 percent, blasting past analysts’ estimates of an 8.5 percent rise, according to Refinitiv IBES data.

The Chicago-based company kicked off quarterly earnings reports among publicly traded restaurants. Investors expect to see strong sales but will be listening for warnings about whether consumers will keep dining out as recessionary pressure builds through the rest of the year.

On Monday, the privately held sandwich chain Subway said its global comparable sales were 12.1 percent higher in the first quarter and that guest visits rose.

While McDonald’s has raised prices of its burgers and fries to shield its margins, its meals have still remained less expensive than its competitors. As of last year, McDonald’s menu prices had risen 10 percent.

The average spending per McDonald’s trip was $7.77 for the 12 months ended March 31, less than its closest burger rivals Burger King and Wendy’s and most other fast-food brands, according to data firm Numerator.

The company previously said in January it was seeing low-income consumers spending less with each visit, but that they were visiting more often.

Traffic at McDonald’s restaurants grew throughout the first 14 weeks of the year, even when the fast-food industry as a whole was experiencing footfall declines, data from Placer.ai showed.

McDonald’s is launching improvements to its burgers including softer buns that are toasted and saucier Big Macs. The company has also doubled down on meal deals and promotions, including celebrity tie-ups with Cardi B and Offset.

The company’s total revenue increased 4 percent from the prior year to nearly $5.9 billion in the three months ended March 31. That bested estimates of a 1.4 percent drop year-over-year to $5.587 billion.

On an adjusted basis, McDonald’s earned $2.63 per share, compared with estimates of $2.33. The company’s total restaurant margins in the U.S. rose 14 percent in the quarter.

McDonald’s is restructuring its corporate operations, including laying off hundreds of U.S. employees and closing offices. It incurred $180 million of pre-tax restructuring charges, according to the earnings release.

By Hilary Russ and Deborah Mary Sophia