McDonald’s Q2 FY 2016 Earnings Preview: Investment In Quality, All Day Breakfast To Drive Revenues
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1) Launch of All Day Breakfast helped improve top-line
- Comparable sales in Q1’16 increased 5.4% in the U.S.
- Internationally, a 5.2% growth in comparable sales in Q1’16.
- A 6% improvement in overall customer satisfaction scores.
- Gained market share relative to QSR’s sandwich segment.
2) Strategy, going forward
- Grow the China, Korea, and Hong Kong markets by adding at least 1,500 restaurants in the next 5 years.
- Establishing a strategic partnership in the Nordic markets for the existing 460 restaurants in the area.
- Focus on completion of its three-year $30 billion share buyback target, which will likely help EPS growth.
- Investment in food quality, speed and accuracy of orders, and reduction of employee turnover.
- Widening its geographical reach by opening new restaurants.
- As a part of its $500 million cost saving plan, MCD is focusing on outsourcing jobs to cheaper regions such as India.
3) Continued improvement in top-line and bottom-line
- All Day Breakfast is expected to drive revenues in the upcoming quarterly results.
- Potential cut in additional labor costs related to crew wages and benefits will likely help margins.
- Low commodity prices to positively effect costs, thus, the bottom-line.
4) Industry-wide comparable sales continue to be weak
- Same store traffic at -3.5% in April; worst in 2 years.
- Comp sales at -0.3%, while same store traffic at -2.7% in May.
Have more questions on McDonald’s? See the links below.
- What’s McDonald’s Fundamental Value Based On Expected 2016 Results? (Updated After Q1 2016)
- By What Percentage Have McDonald’s Revenues And EBITDA Grown Over The Last Five Years?
- What Is McDonald’s Revenue & EBITDA Breakdown? (Updated After Q1 2016)
- How Has McDonald’s Revenue And EBITDA Composition Changed Over 2011-2015?
- McDonald’s Q1 FY 2016 Earnings Preview: All Day Breakfast To Drive Comp Sales In The US
- Where Will McDonald’s Revenue And EBITDA Growth Come From Over The Next Three Years? (Updated After Q1 2016)
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for McDonald’s
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