MCD McDonalds Corp

   (FROM THE WALL STREET JOURNAL 1/26/16) 
   By Julie Jargon 

McDonald's Corp. posted its best U.S. quarterly sales in nearly four years, driven by all-day breakfast, in the strongest indication that Chief Executive Steve Easterbrook's rebuilding initiatives are gaining traction less than a year after he took the helm.

Sales at McDonald's U.S. restaurants open at least 13 months jumped 5.7% in the fourth quarter. That was well above the 2.7% growth analysts had expected and the best same-store sales results in the U.S. in 15 quarters.

Signs that a turnaround under Mr. Easterbrook was beginning to take hold emerged in the third quarter, when McDonald's U.S. division posted its first quarterly increase in same-store sales in two years. That momentum continued into the fourth quarter with the launch of breakfast all day in October -- the company's biggest strategic change since it rolled out McCafe beverages throughout the U.S. in 2009.

Investors had expected all-day breakfast to boost sales, but not to this degree. Globally, same-store sales rose 5%, while analysts were expecting growth of 3.2%.

On Monday, McDonald's shares closed up 80 cents at $119.20, while U.S. markets were lower overall.

Mr. Easterbrook, who became CEO last March, called the fourth-quarter results "a testament to the swift changes we made and the early impact of our turnaround efforts," and said he expected the momentum to continue.

He cautioned, however, that it would take at least six more months of positive same-store sales growth before the company moves from a turnaround mode to a growth mode.

While all-day breakfast exceeded the company's expectations and helped the chain gain market share from rivals in the quarter, Mr. Easterbrook expects the initial boost to settle down.

"That's why we're working on a number of other initiatives," he told investors during a conference call, referring, in part, to a new mobile app through which customers can receive coupons. "This isn't a single-initiative turnaround plan."

The McDonald's chief has enacted numerous changes at a burger chain that had been struggling to remain relevant with consumers. He has pared down the menu, provided customers with more transparency about how its food is made, raised wages for workers at company-owned stores and announced that McDonald's will switch to antibiotic-free chicken and cage-free eggs in the U.S.

There have been structural and management changes as well, aimed at giving local markets more autonomy over the food McDonalds serves so it can meet local taste preferences.

Simplified menu boards and a new system of confirming orders twice at the drive-through have improved customer satisfaction scores, Mr. Easterbrook noted.

The McDonald's chief also staved off pressure to spin off the Oak Brook, Ill., company's vast real estate holdings, announcing plans instead to return more cash to shareholders, reduce spending and sell about 4,000 company-owned restaurants to franchisees by the end of 2018.

Earlier this month, the company introduced a value menu that it expects to help solve problems it has had finding the right price offerings. Its new "McPick 2" menu allows customers to pick a pair of items for a total of $2 from among four choices: mozzarella sticks, small fries and the McDouble and McChicken sandwiches.

"McDonald's U.S. business begins 2016 as a customer-led organization focused on delivering outstanding customer service through comprehensive simplification efforts, core menu enhancements and a compelling everyday national value platform," the company said in a statement. "Generating sustained, positive guest traffic remains a top priority for the segment."

Overall, McDonald's posted a quarterly profit of $1.21 billion, or $1.31 a share, up from $1.1 billion, or $1.13 a share, a year earlier. Revenue declined 3.5% to $6.34 billion.

Analysts projected earnings of $1.23 a share on $6.22 billion in revenue for the quarter, according to Thomson Reuters.

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Lisa Beilfuss contributed to this article.

(END) Dow Jones Newswires

January 26, 2016 02:47 ET (07:47 GMT)

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