McDonald’s Corporation (NYSE:MCD) will probably gain from its digital marketing strategies, strong comps growth, and development plans. Sales have also been boosted in recent quarters by a focus on drive-thru channels and loyalty programs. While overall comps have significantly increased, they are still far below pre-pandemic levels in several markets.
Let’s go over why stockholders should hold onto their shares for the time being.
McDonald’s Principal Growth Drivers
To spur expansion, McDonald’s has been concentrating on digitization. About two-thirds of all US sales occurred through drive-thrus before the COVID-19 pandemic. The company claimed that, despite reopening dining rooms, drive-thru sales in its top six regions are still robust compared to pre-pandemic levels. The company stated that in the second quarter of 2022, digital sales—including those made through mobile apps, kiosks, and delivery—accounted for more than 30% of system-wide revenues in its top six areas.
McDonald’s continued to dazzle investors in the second quarter of 2022 with comparative solid sales growth. Global comps increased by 9.7%, compared to a gain of 40.5% in the corresponding period last year. This is the sixth quarter in a row that comps have increased. Comparables in the US, internationally operated markets, and the international developing licensed segment increased by 3.7%, 13%, and 16% in the first quarter. Latin America and Japan both experienced strong economic growth. In Japan, the company reported comps growth for the 27th consecutive quarter.
By increasing its presence in current regions and entering new ones, McDonald’s feels there is a significant chance to grow all of its brands internationally. The performance continues to be driven by its expansion activities. Despite the pandemic, the company keeps growing on a global scale. In 2022, it intends to inaugurate 1,300 restaurants (including almost 800 in China) in the IDL market and more than 1,800 restaurants worldwide, including 500 openings in the US and IOM segment. For 2022, the business forecasts restaurant growth of almost 3.5%.
McDonald’s continues to emphasize its loyalty program to increase sales and average checks. It thinks the initiative will aid customer base growth and retention. The company claimed increased digital interaction across all markets in the second quarter of 2022. McDonald’s observed increased customer frequency and additional purchases due to personalized loyalty messaging, a robust selection of mobile app deals, and content offerings.
The company is nonetheless upbeat and anticipates the measures to boost revenues and average checks in the subsequent periods, given the growth in digital adoption. McDonald’s currently offers reward programs in more than 50 markets, including France, the U.S., Germany, Australia, and Canada.
Shares of McDonald’s have increased 9.6% over the past year, outpacing the 13.2% decline in the industry.
McDonald’s Have Concerns
While overall comps have significantly increased, they are still far below pre-pandemic levels in several markets. The China market experienced negative comps in the second quarter of 2022. Comps in China have suffered because of the softening economy and COVID-related regulatory regulations.
Due to geopolitical unrest, McDonald’s announced its pullout from the Russian market during the second quarter of 2022. In addition, it expressed worries about a challenging operating environment brought on by growing inflation, an increase in COVID-19 cases, and the restoration of government limitations in several markets, all of which exacerbate labor shortages and supply chain difficulties. McDonald’s claimed that weak consumer confidence is present worldwide due to growing inflation and that a global recession is not completely ruled out.
McDonald’s will reopen some of its facilities in Ukraine almost six months after Russia’s invasion forced it to halt operations there.
According to Paul Pomroy, McDonald’s corporate senior vice president for international operated markets, it is in the greatest interest of the Ukrainian people and the economy.
Featured Image: Megapixl @Wolterk
