Travis Scott Fuels McDonald's Third Quarter Rebound
Like many companies, McDonald's was greatly affected in the early days of the coronavirus outbreak. In July, the company said sales fell by 30% in the second quarter compared to the same period a year earlier as net income fell by nearly 70%.
"In many markets around the world, most of notably in the U.S., the public health situation appears to be worsening," McDonald's CEO Chris Kempczinski said during the second quarter earnings call. "Nonetheless, I believe that Q2 represents the trough in our performance as McDonald's has learned to adjust our operations to this new environment."
With the third quarter now in the books, Kempczinski appears to have been correct regarding the second quarter marking a trough. McDonald's reported last week that same-store sales rose by 4.6% in the U.S. in the third quarter as September was the best month in nearly a decade with a "low double digit" increase in same-store sales.
Globally, same-store sales fell by 2.2% in the third quarter as international same-store sales fell by 4.4%. The 2.2% decline in same-store sales last quarter marks a quick rebound from the second quarter's 23.9% drop.
The quick turnaround is being attributed to its thriving drive-thrus as well as recent promotions such as the Travis Scott Meal and Spicy Chicken McNuggets. The $6 Travis Scott Meal was so popular it led to McDonald's temporarily controlling the supply of Quarter Pounder beef, bacon, slivered onions and shredded lettuce as stores ran out of ingredients. Items from the promotion are looking for top dollar on eBay with items such as a promotional poster listed for $300 and a Travis Scott burger box with a ticket asking $75.
"Our third quarter performance demonstrates the underlying resilience of the McDonald's brand," Kempczinski said. "Our unique strengths, including our unrivaled Drive Thru presence around the world, advanced delivery and digital capabilities, and marketing scale have become even more important during the pandemic."
The strong results even led McDonald's to increase its quarterly dividend by 3% to $1.29 per share. Shares of McDonald's sit just below all-time highs and are now up more than 15% year-to-date after gaining more than 80% from the March low.
"While current year business results have been impacted by the Covid-19 pandemic, the pace of recovery paired with the Company's strong financial position support this increase to the dividend while still giving the Company the ability to invest in the business," McDonald's said.
McDonald's hopes to keep the momentum going as it just started selling the J. Balvin Meal through November 1 and is introducing new breakfast items for the first time in nearly a decade in an attempt to win back lost breakfast sales.
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