McDonald’s 3Q profit rises, revenue misses

Mae Anderson
October 22, 2013
AAP

MCDONALD’S is introducing some higher-priced options to its Dollar Menu and renaming it “Dollar Menu and More” to spur sales in the US.

The company announced the changes to its popular low-priced menu on Monday, the same day that the world’s biggest burger chain reported that its third-quarter profit rose five per cent as it benefited from a Monopoly promotion in the US and strength in the UK and Russia.

But its performance in Australia, China, and Japan was weaker.

The company plans to introduce some $US2 and $US5 options on the Dollar Menu, which currently features things like the Grilled Onion Cheddar Burger and a McChicken sandwich for a buck. The new “Dollar Menu and More” will include items such as $US2 burgers and a $US5 20-piece chicken McNuggets.

The menu tweaks come as McDonald’s tries to regain its footing. After outperforming rivals for years, the company has struggled recently as it faces heightened competition, shifting eating habits and tough economic conditions around the world. Late last year, its monthly sales at stores open at least a year fell for the first time in nearly a decade.

To boost sales, the company has been taking a two-pronged approach. On the one end, it’s playing up its Dollar Menu and other affordable options to draw in customers who may be watching their spending more carefully. The strategy has forced rivals Burger King and Wendy’s to more aggressively push deals and promotions as well.

At the same time, McDonald’s also is trying to adjust its image and menu to better reflect healthier eating habits. In the US, for example, the company recently rolled out chicken wraps and the option to substitute egg whites in any of its breakfast sandwiches. Early next year, it’s also said, it will start giving customers the option to pick a salad instead of fries with their value meals.

For the three months that ended on September 30, net income rose to $US1.52 billion ($A1.58 billion), or $US1.52 per share. That compared with $US1.46 billion, or $US1.43 per share, last year. Analysts expected $US1.51 per share, according to FactSet.

Revenue rose two per cent to $US7.32 billion from $US7.15 billion last year. Analysts expected $US7.33 billion.

McDonald’s, based in Oak Brook, Illinois, said sales in stores open at least 13 months rose 0.9 per cent, including a 0.7 per cent rise in the US and a 0.2 per cent rise in Europe. The measure, considered important because it gauges growth at continuing locations after stripping out recently opened and closed stores, fell 1.4 per cent in the Asia/Pacific, Middle East and Africa regions.

“Our results reflect McDonald’s ability to grow amid the broad-based challenges of the current environment by focusing on those areas of the business within our control,” said chief executive Don Thompson.

Looking forward, McDonald’s expects fourth quarter sales in stores open at least 13 months will be on par with the third quarter’s 0.9 per cent rise.