Bacon Boosts Burger and Fry Business at McDonald’s in Q1

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From the Bacon Event in the United States to the debut of Le Big Mac Bacon in France, promotions of thick-cut smoked bonus bacon ingredients helped “beef up” burger sales at McDonald’s outlets on both sides of the Atlantic during the first quarter of 2019, which ended on March 31. Global comparable revenues increased 5.4%, reflecting strong comparable sales across all segments. This beat Wall Street analysts’ expectations of +3.4%.

1 Bacon ClassicsProclaiming “There’s no such thing as too much bacon,” McDonald’s introduced Big Mac Bacon, Quarter Pounder Bacon and Cheesy Bacon Fries for a limited time on January 30.

Here are other Q1 highlights reported by the world’s leading fast food restaurant chain, which operates approximately 38,000 units in over 100 countries:

  • Consolidated revenues decreased 4% (while increasing 2% in constant currencies), reflecting strong comparable sales, partly offset by the impact of the company’s strategic refranchising initiative.
  • System-wide sales rose 6% in constant currencies.
  • Consolidated operating income decreased 2% (increased 3% in constant currencies).
  • Profit was flat at $1.33 billion, or $1.72 per share (increased 5% in constant currencies).
  • Operating income fell by 5%, reflecting lower gains on sales of restaurant businesses and lower company-operated margin dollars, partly offset by higher franchised margin dollars and lower G&A costs.
  • The company returned approximately $1.9 billion to shareholders through share repurchases and dividends.

2 McD Pres and CEO Steve EasterbrookSteve Easterbrook, McDonald’s president and chief executive officer.

“We started the year strong with our 15th consecutive quarter of positive global comparable sales, reflecting continued broad-based momentum across each of our global segments,” said President and CEO Steve Easterbrook.

In the USA, first quarter comparable sales advanced 4.5%, reflecting successful promotions, including the Bacon Event, the 2 for $5 Mix and Match Sandwich and McNuggets deal, and newly launched Donut Sticks, as well as a net positive impact from the “Experience of the Future” deployment. The highly hyped Bacon Event in late January featured an hour-long offer of free bacon tied in with promotions for new Bacon Cheesy Fries, Bacon Big Macs and Quarter Pounders.

“People love bacon, so we had to see what would happen if we combined all that tastiness,” said Chef Michael Haracz, McDonald’s manager of culinary innovation. “As a bacon enthusiast myself, I’m proud to say that we’ve done right by bacon.”

+6% International Sales
In the International Operated segment, first quarter comparable sales increased 6%, reflecting positive results across all markets, primarily driven by the United Kingdom and France. Same-store sales in the French market rose to the highest level since 2011, thanks partly to the popularity of Le Big Mac Bacon.

The segment’s operating income was flat (increased 8% in constant currencies). The constant currency increase was primarily due to sales-driven improvements in franchised margin dollars.

In the International Developmental Licensed segment, first quarter comparable sales increased 6.0%, reflecting positive sales performance across all geographic regions.

“Two years into the Velocity Growth Plan, our sustained performance gives us confidence that our strategy is working, as more customers are experiencing a better McDonald’s every day,” said Easterbrook. “We remain focused on optimizing execution of the plan, and our recent acquisition of Dynamic Yield [an Israeli artificial intelligence startup specializing in personalized customer ordering technology] further demonstrates our relentless determination to seize opportunities to unlock greater potential and position McDonald’s for long-term sustainable growth.”

Results for the quarter in constant currencies primarily reflected stronger operating performance due to an increase in sales-driven franchised margin dollars, partly offset by lower gains on sales of restaurant businesses, mostly in the USA.

Results in 2019 included $47 million, or $0.06 per share, of additional income tax costs due to regulations issued in January 2019 related to the Tax Cuts and Jobs Act of 2017 (“Tax Act”). Results in 2018 included $52 million, or $0.07 per share, of additional income tax costs associated with adjustments to the provisional amounts recorded in December 2017 under the Tax Act.

Foreign currency translation had a negative impact of $0.09 on diluted earnings per share for the quarter.

3 McD people 960x542Fifteen consecutive quarters of positive global comparable sales is reason to celebrate at McDonald’s.