McDonald's Gets Lift From Focus on Regulars -- WSJ

By Julie Jargon Features Dow Jones Newswires

McDonald's Corp.'s focus on regular customers is paying off.

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The burger giant recently pledged not to chase customers who rarely eat fast food. Instead, McDonald's has made more of its hearty breakfast items available all day, priced soda and coffees at $1 and introduced new Big Mac sizes -- all at the behest of cost-conscious regulars.

"Our greatest opportunities are at the core of our business," Chief Executive Steve Easterbrook told investors Tuesday.

The tighter focus led to better-than-expected sales globally and in its critical U.S. market in the first quarter.

The company is trying to narrow the gap between its prices and those at the grocery store by raising menu prices more slowly than the rate of supermarket inflation. McDonald's is testing new mobile ordering and payment options and automated cashiers. The company said Tuesday it plans to expand a delivery service it has tested in Florida.

Mr. Easterbrook said each initiative is designed to bring "the biggest benefit to the most customers in the shortest amount of time."

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At the same time, McDonald's wants to improve the quality of its food. Next year it plans to switch to fresh, rather than frozen, beef in Quarter Pounders. Next week a higher-end, customizable "Signature Crafted" burger menu will debut nationwide. Those burgers will also be made with fresh beef next year.

Global same-store sales in the quarter rose 4%, well above the 1.3% increase anticipated by analysts in a Consensus Metrix survey. Same-store sales in the U.S. rose 1.7%, beating the 0.8% decline analysts expected.

McDonald's has also transferred ownership of many restaurants to independent operators. The model, embraced by other fast-food chains as well, lets companies collect a piece of sales without the costs and headache of managing hundreds of stores. During the first quarter, revenue from franchised restaurants climbed 5.3% as sales from company-operated restaurants, which makes up a larger chunk of the top line, slipped 9.1%.

In all, McDonald's earned $1.21 billion in the quarter, or $1.47 a share, up from $1.12 billion, or $1.25 a share, a year earlier. Revenue slipped 3.9% to $5.68 billion. Analysts polled by Thomson Reuters had expected $1.33 a share on $5.53 billion in revenue.

McDonald's shares rose 5% on Tuesday to trade at $141 a share.

Anne Steele contributed to this article.

Write to Julie Jargon at julie.jargon@wsj.com

(END) Dow Jones Newswires

April 26, 2017 02:48 ET (06:48 GMT)