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McDonald's Q2 earnings, sales jump on chicken sandwiches, promotions

·Producer
·4 min read
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McDonald's (MCD) reported second quarter financial results on Wednesday that beat Wall Street expectations, helped by the introduction of a new crispy chicken sandwich, digital incentives and promotional menu items that fed surging consumer demand.

Here is how McDonald's performed this quarter, compared to Wall Street’s expectations, according to Bloomberg consensus estimates:

  • Revenue: $5.89 billion versus $5.57 billion expected

  • Adj. earnings per share (EPS): $2.37 versus $2.11 expected

  • Same-store sales: 40.5%versus 38.73% expected

The continuation of COVID-19 era takeout trends and specialty menu items that helped make the fast food chain an unlikely beneficiary of the pandemic kept McDonald's rolling in Q2, but the initial stock reaction was flat in pre-market trading.

The results indicate strength in the company's recovery efforts amid the pandemic, which wreaked havoc on the food and restaurant space for most of last year as diners remained largely indoors.

Yet McDonald's — which heavily leaned into drive-throughs and the digital experience that encouraged customer loyalty — has consistently been one of the industry's bright spots. Currently, the stock is hovering near record highs. 

"Our performance is a continued demonstration of the broad-based strength and resiliency of our business as global comp sales in the second quarter increased nearly 7% over 2019," McDonald's President and CEO Chris Kempczinski said in the earnings release. 

"It's clear that our next chapter will be driven by our leadership in digital," he continued.

However, the threat of the COVID-19 Delta variant looms large both domestically and internationally, where extended lockdowns have previously hurt same-store sales figures abroad. 

On Wednesday's call, McDonald's noted that the Delta variant is reducing mobility in Australia, and that France and Germany still have some indoor dining restrictions. Additionally, the company expressed concerns over COVID-19 resurgences in southern China, adding that comparable sales in the world's 2nd largest economy have not yet come back to 2019 levels.

McDonald's enhances customer experience

On Monday, the Golden Arches continued to invest in its customer-first strategy, tapping company veteran Manu Steijaert as its first global chief customer officer. As value eating and menu innovation helps lure in customers, Steijaert's role will focus on elevating the diner experience both in-person and online. 

McDonald's leans into digital
McDonald's leans into digital

The executive will lead the newly formed customer experience team, beginning August 1, and will also oversee all marketing, data analytics, and digital customer engagement, as well as the brand's first nationwide loyalty program.

The recently launched program, titled MyMcDonald’s Rewards, allows customers to collect points and unlock free rewards for every one dollar spent on qualifying purchases. 

McDonald's currently has 22 million loyalty members in the U.S., the company revealed during its earnings call, with plans to launch a rewards program in the UK and Germany. 

It's the brand's latest push when it comes to upping the digital experience that also includes restaurant kiosks, digital menu boards at drive-throughs, McDelivery, and the mobile app.

Taco Bell (YUM), Popeyes (QSR), Chipotle (CMG) and others have also launched new loyalty programs (or expanded on pre-existing ones) to retain customers gained throughout the pandemic.

Furthermore, McDonald's new crispy chicken sandwiches and star-studded Famous Orders campaign — which recently featured global pop icons BTS — also helped lift sales. 

The specialty celebrity meal, which debuted in select countries including North America, Austria and Brazil on May 26th, includes a 10-piece Chicken McNuggets, medium fries, soda and — in a first for U.S. consumers — a chili and cajun dipping sauce inspired by popular recipes from McDonald's South Korea.

McDonald's earnings on tap
McDonald's earnings on tap

Investors eye same-store sales growth

The company's U.S. same-store sales rose 25.9%— above expectations of 23.03%. Internationally, same-store sales growth improved exponentially, climbing 75.1% compared to one year ago, or 2.6% on a two-year basis

Increased foot traffic patterns at McDonald's locations also seem to back up the positive data.

According to a new report by analytics firm Placer.ai, the Golden Arches is still on course for a full pandemic recovery, with foot traffic patterns approaching pre-pandemic levels despite a slow start at the beginning of Q2.

During the week of July 12, McDonald’s saw its first year-over-two year visit growth since the start of the pandemic with visits up 2.9%, compared to the same week in 2019, the analytics firm noted.

July has proven to be the burger maker's comeback month, as visits were still down between 8% and 9% at the start of June versus 2019.

Moving forward, the company will continue to face challenges as customers have not yet returned to pre-pandemic dining patterns, as Placer.ai's foot traffic data showed. 

Other headwinds include the ongoing labor crunch as the restaurant sector, in particular, has struggled to find workers. In May, McDonald's hiked hourly wages "by an average of 10%" for more than 36,500 employees at more than 660 U.S. restaurants.

Alexandra is a Producer & Entertainment Correspondent at Yahoo Finance. Follow her on Twitter @alliecanal8193

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