McDonald’s (NYSE:MCD) reported strong Q1 results driven by broad based comparable sales growth. Global comparable sales witnessed an increase of 4.2% over the same quarter last year. McDonald’s is the market leader in the fast food market with about 19% share. It competes with Wendy’s (NYSE:WEN), Subway, Burger King, and Yum! Brands (NYSE:YUM). In the specialty coffee market, it competes with Starbucks (NASDAQ:SBUX).
Quarterly Highlights
Amid the concerns of rising food costs for major food companies around the world, McDonald’s reported a 9% increase in its revenues over the same quarter last year. Comparable sales growth witnessed an increase of 5.7% in Europe followed by 2.9% in the U.S., and 3.2% in Asia, the Middle East and Africa. Australia and China fueled the Asia/Pacific, Middle East and Africa segment’s sales growth.
Limited-time value offerings, signature food events, restaurant re-modeling and service initiatives around drive-thru, delivery and extended operating hours contributed to results. Key contributors to the quarter were beverages, including the McCafe line-up, the new Fruit & Maple Oatmeal and featured products including the 20-piece Chicken McNuggets and the Chipotle BBQ Bacon Angus burger.
Average Spend per Customer Visit
We anticipate that average spend per customer visit will increase in the coming years. By emphasizing the local food preferences of its customers, McDonald’s has been able to grow sales in developing economies like India.
McDonald’s has been successful in terms of playing around with its food offerings. In February it introduced the Chipotle and Bacon flavor to its line of Angus burger and Snack Wraps in the U.S., which drove total Angus burger sales to their highest rate and increased total unit movement by more than 30%.
We currently maintain a $78.40 price estimate for McDonald’s stock, roughly in line with market price.
