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McDonald's (MCD)
McDonald's Reports First Quarter Profit Increase
The McDonald's Corporation (MCD: Charts, News, Offers) surprised Wall Street today with a 3.5% increase in first quarter earnings. The fast-food giant announced that its net income improved from last year's $946.1 million to $979.5 million. McDonald's also seems optimistic that the company's recent, strong sales will continue, if not improve, throughout April. What has this hamburger chain so upbeat about the future? How was McDonald's able to drive first quarter profit up?
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In short, McDonald's first quarter performance can be attributed to an increase in sales across the globe. The United States sales climbed up 4.7% while Europe increased 3.2%. The world's largest restaurant corporation even saw sales rise 5.5% in the Asia/Pacific, Middle East and Africa region. The McDonald's Corporation also reported that it is gaining market share in the United States. Unfortunately, McDonald's did see a decrease in its global profit margin due to the stronger dollar. Overall, there were several factors responsible for this recent surge in sales.
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The world's economic downturn has increased the popularity of cheaper meals. Consumers are looking, now more than ever, for affordable dining options when they eat out. In addition, McDonald's longer hours of business are resonating very well with its consumer base. McDonald's combination of affordability and convenience seem to be attracting an increasingly larger portion of the market. However, its expansive menu selection has also helped entice consumers to the golden arches. McDonald's reported that sales experienced a boost from breakfast, specialty coffee, and chicken items, but coffee, specifically, seems to be McDonald's focus.
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The McDonald's Corporation has worked hard to roll out its specialty coffee offerings in the United States. The fast-food titan is hoping to break into the specialty coffee market that is currently occupied by companies like Starbucks (SBUX: Charts, News, Offers) and Dunkin Donuts. McDonald's anticipates that every U.S. restaurant will be serving the new coffee offerings by the end of the year. The McDonald's Corporation feels that the introduction of these new coffees will help widen its current consumer market.
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Overall, McDonald's must be very pleased with its first quarter performance. The fast-food titan managed to boost profits while increasing sales and domestic market share. McDonald's is also looking to the future with its new specialty coffee drinks. However, the hamburger chain's entrance into the specialty coffee sector will not be uncontested. McDonald's will meet resistance from Starbucks and other competitors. The verdict is still out on McDonald's ability to breakdown the specialty coffee sector's entry barrier, but the world's largest restaurant corporation is hoping for a favorable ruling.
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