McDonald’s Corp. beat quarterly sales forecasts on Wednesday and said it would spend more on technology and research in 2020, as the world’s largest burger chain bets on revamped stores and menu additions to lure diners and gain market share.
McDonald’s chief executive officer Chris Kempczinski, who took charge in November after the former CEO was dismissed, said global comparable sales growth in 2019 was the chain’s highest in more than 10 years.
But the company continues to battle lower U.S. store traffic and faces stiff competition in breakfast against rivals including Starbucks Corp. and Dunkin’ Brands Group Inc., as well as the Wendy’s Co. impending launch into morning menu items.
“Breakfast remains the area of focus to further improve U.S. traffic,” Guggenheim analyst Matthew DiFrisco said.
Over the past few years, McDonald’s has added kiosks, digital displays and delivery partners, as well as new burgers, beverages and breakfast foods.
It also began modernizing stores across the globe and bought two smaller technology firms that focus on digitizing stores and drive-thru menus.
Sales in U.S. restaurants open for more than 13 months rose 5.1 per cent for the fourth quarter ended Dec. 31, slightly above the estimate of a 4.67 per cent increase.
Still, the number of customers at its U.S. restaurants fell 1.9 per cent in the quarter, though that was better than the 2.2 per cent decline for 2018.
“Returning to guest count growth in the U.S. remains our top priority,” chief financial officer Kevin Ozan said in a post-earnings conference call.
McDonald’s reported a 5.9 per cent rise in global comparable sales, both for the full year and the fourth quarter, beating analysts’ forecast for a 5.23 per cent growth, according to IBES Refinitiv.
The stock gained 11.3 per cent in 2019, lagging the broader S&P 500 restaurants index that rose nearly 22 per cent last year. Shares were up 2.7 per cent at $216.12 on Wednesday morning.
CHINA CORONAVIRUS IMPACT
The deadly coronavirus in China led McDonald’s to close all of its restaurants – several hundred – in the Hubei province, where the outbreak is centred.
Remaining McDonald’s stores – about 3,000 – in the rest of China are still open, Kempczinski said.
The virus, which originated in the Chinese city of Wuhan, has spread across the world and prompted companies to close stores and restrict travel.
Starbucks on Tuesday said it expected a material, though temporary, impact to its 2020 finances as the virus led it to close about 2,000 stores there.
However, for McDonald’s, China makes up only about 4 per cent to 5 per cent of systemwide sales and 3 per cent of operating income. In early 2017 it sold 80 per cent of its business there, though it still collects royalty fees and considers China important for potential growth.
In the United States, about 70 per cent of its 14,000 stores have finished upgrading to more modern counters and dining areas.
This year, it expects to spend about $2.4 billion on capital expenditures, about the same amount as last year. About half of that will be in the United States.
It also plans to open about 1,400 new restaurants in 2020, mostly outside the United States.
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