McDonald’s (NYSE:MCD) is beaming as a marketing campaign commemorating the “birthday” of its large purple mascot went viral, contributing to surprisingly strong second-quarter sales. McDonald’s stock gained more than 12% since the start of the year.
During the period of April to June, same-store sales, which refer to sales at stores that have been open for at least a year, increased by about 12% globally. According to the results of a poll conducted by FactSet, analysts predicted an increase of 9.4% for Wall Street, but the actual increase was significantly higher.
It’s possible that some of these advancements will be lost in the second half of this year. During a conference call with investors on Thursday, McDonald’s Chief Financial Officer Ian Borden stated that the price hikes that have helped boost McDonald’s sales in recent quarters will begin to moderate as inflation begins to fall.
Borden stated that “we recognize that we are operating in a challenging macro environment,” which is characterized by expenses that continue to be elevated, consumers whose discretionary spending is constrained, and industry traffic that is under pressure.
The Grimace ad, which featured a limited-time purple milkshake, took on a life of its own as people posted videos of themselves sipping the milkshake and then ending up on the ground in a sloppy puddle of purple, or having some kind of experience that seemed to have a paranormal quality to it. There is a video on TikTok that shows a young man drinking a milkshake while driving, and suddenly the milkshake explodes, taking him with it. This video has received more than five million “likes.”
The previous few months have been marked by the prevalence of grimaces. “It’s been all over the news, and there have been more than three billion views on TikTok,” said CEO Chris Kempczinski. This viral phenomenon is simply another evidence point that marketing at McDonald’s in today’s day and age is quite powerful.
However, in other countries and regions, McDonald’s raised prices to entice customers who are weary of inflation. The McSmart value menu, which was first released in Germany earlier this year, has been such a hit with customers that the firm has just recently unveiled a menu very identical to it in the United Kingdom.
According to Kempczinski, resilient customers can still be found in the United States. According to him, McDonald’s is seeing an increase in the number of consumers with better incomes who are trading down from sit-down restaurants. According to him, customers whose annual incomes are $45,000 or less are spending less money on each order, but they are coming in more frequently.
According to Kempczinski, “There is certainly a concern with the US consumer that shows up in their sentiment; however, our business and our value positioning in the market has placed us into a good position to be able to weather that and continue to drive the share gains that you’re seeing.”
The Chicago chain reported Thursday that its revenue increased by 14% to $6.5 billion. That was far higher than the forecast of $6.3 billion that market analysts had.
Same-store sales in the United States increased by more than 103% during the quarter, which compares to a rise of only 3.7% during the same period a year earlier.
The company’s quarterly net income was $2.3 billion, nearly twice what it was a year ago. The company reported earnings per share of $3.17, which was higher than the consensus estimate of $2.78 among market analysts.
One of those one-time items was a charge for restructuring expenditures that amounted to 18 million dollars. In an effort to hasten the process of innovation and decision-making, McDonald’s began the month of April by laying off corporate staff.
McDonald’s and other restaurants have had to consider how much they can rely on customers to help cover their own mounting costs. However, Kempczinsk said in a prepared statement that the company is continuing to invest in the brand and provide customers with what they want.
This includes establishing connections with customers through the McDonald’s app.
“On the digital front, McDonald’s digital investments have made its app much easier to use and have increased convenience for the consumer,” said Neil Saunders, managing director of GlobalData. “On the digital front, McDonald’s digital investments have increased convenience for the consumer.” This has resulted in a significant increase in the number of purchases made both on the spur of the moment and in advance of certain meals.
McDonald’s Stock Soars Following Earnings Release
On Thursday, McDonald’s stock price increased by more than 1.5%.
Featured Image: Pexels @ Olavi Anttila
