McDonald's U.S. sales revive amid stiff competition

By Markets Reuters

McDonald's Corp's turnaround gained momentum in the latest quarter despite intense rivalry in the United States, helped by its all-day breakfast, the "McPick 2 for $2 promotion" and a healthier chicken McNugget, the company said on Friday.

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Sales at established U.S. restaurants rose 1.3 percent as a result, offsetting the negative impact of competition and lower grocery prices that encouraged some diners to cook at home.

The result from the United States, which accounts for about 40 percent of overall profit at McDonald's, just exceeded analysts' lowered expectations, and was not as robust as the 2 percent U.S. same-store sales gain reported by rival Dunkin' Donuts on Thursday.

McDonald's international restaurants easily beat expectations on same-store sales growth in Britain, Australia, Canada and Germany.

As a result, global sales at restaurants open at least 13 months rose 3.5 percent for the third quarter, handily beating the 1.5 percent average gain expected by analysts.

McDonald's Chief Executive Steve Easterbrook has vowed to transform the 60-year-old chain into a "modern, progressive burger company." He has introduced the all-day breakfast, banned the use of medically important antibiotics in U.S. chicken, and has been working to speed up service and make it friendlier.

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Shares of McDonald's jumped 2.6 percent to $113.44 in midday trading, despite analyst warnings that fourth-quarter U.S. same-store sales could drop as much as 2 percent due to the high bar set by the debut of the all-day breakfast in October last year.

The world's largest fast-food chain's net income increased 2.6 percent to $1.28 billion, or $1.50 per share, helped by lower food costs and better-than-expected global restaurant sales. McDonald's had 9.3 percent fewer shares outstanding versus the year earlier, which lifted earnings per share results.

Excluding items, the company earned $1.62 per share, beating the average analyst estimate of $1.48, according to Thomson Reuters I/B/E/S.

Total revenue fell almost 3 percent to $6.42 billion. That was down for a ninth straight quarter, largely due to the sale of restaurants to franchisees. Nevertheless, the result still exceeded the average analyst estimate of $6.28 billion.

(Reporting by Lisa Baertlein in Los Angeles and Sruthi Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty and Bernadette Baum)