McDonald's Posts 11.4% Sales Hike Abroad, Highest In Decade

On Friday, McDonald's reported its third-quarter earnings which were - surprise -- up again. The biggest increases were in its Asia/Pacific, Middle East and Africa division, where same-store sales climbed an astounding 11.4%, the highest in a decade. European restaurants also were up in the quarter, rising 6.5%.

CMO Mary Dillon shed light on how the fast food giant is producing such high numbers abroad in a recent speech to attendees of the Association of National Advertisers "Master of Marketing" conference.

"People's need for what we have to offer, convenience and value, has grown," she said. "The way people need our brand is changing every day. People are eating around the clock. In the U.S., many of our restaurants open at 5 a.m.; some are open in the middle of the night for people getting off night shifts.

"In Egypt and Brazil, real estate is at a premium so there are no drive-throughs," said Dillon, "but there is home delivery. To truly connect with communities, you have to be local. We close our restaurants in Saudi Arabia for prayers."



Back home, the U.S. market was at the forefront of its surging sales, with same-store sales up 5.1%, the 18th consecutive quarter of such higher sales.

The company credits breakfast items, chicken snack wraps and coffee for the latest U.S. gains. McDonald's coffee sales have risen 20% since it introduced a higher-priced premium roast coffee in March 2006.

David Morris, senior research analyst at Mintel, agrees that breakfast is a big reason for the company's success. "McDonald's is huge in breakfast. We've estimated that their breakfast sales are 40% of the QSR [quick-serve restaurant] market. They've done this with, along with introducing premium coffee, an innovating menu, breakfast burritos, chicken biscuits. In general, breakfast is under-penetrated. McDonald's has been able to maintain and grow leadership there."

"McDonald's "Plan to Win" went into effect in 2003, and it's largely credited for changing the momentum of our business," says company spokesperson Heidi Barker. "The focus shifted to be better, not just bigger. McDonald's had three years of consecutive positive global comp sales every month for 2004, 2005, and 2006 (the last negative global comp sales were in April 2003). We're now serving about 52 million customers every day around the world, six million more per day than four years ago."

McDonald's reported third-quarter earnings jumped 27% on rising sales of everything from coffee and breakfast items to hamburgers and snack wraps, with help from the weak dollar. The earnings, which were in line with preliminary results released last week, keep the world's largest restaurant chain on a sustained roll around the globe.

Net income for the July-through-September period was $1.07 billion, or 89 cents per share, up from $843.3 million, or 68 cents per share, in the third quarter of 2006. Excluding an after-tax gain of 6 cents per share from the sale of its Boston Market franchise, the Oak Brook, Ill.-based company said its earnings were 83 cents.

Mintel's Morris also credits McDonald's décor redo for the company's recent growth spurts. "The environment itself is a real driver behind the growth that we've seen over the last few years," he said. "They've done a nice job of updating their décor, offering a number of more premium offerings. They're pushing the fast-casual envelope in some ways."

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