All-day breakfast, promotions drive McDonald's profit beat

All-day breakfast, promotions drive McDonald's profit beat

Lucy Nicholson

(Reuters) - McDonald's Corp's quarterly earnings jumped more than expected in the latest quarter, as all-day breakfasts and new meal deals lured more diners to its U.S. restaurants which contribute about 40 percent of overall profit.

Shares in the world's largest fast-food chain are up nearly 28 percent from a year ago, when then-new Chief Executive Steve Easterbrook launched a turnaround plan that has included simplifying sprawling menus and improving speed and service to counter intense competition from the likes of Burger King , Dunkin' Donuts and Shake Shack Inc .

Sales at McDonald's U.S. restaurants open at least 13 months grew 5.4 percent in the first quarter, outpacing the 4.6 percent gain expected by analysts, according to research firm Consensus Metrix.

All-day breakfast, launched in October, has been a hit with U.S. customers looking for thrifty options.

The company also got a lift from a $5 McPick promotional offer, which allowed diners to choose two items from a menu that included the Big Mac and Quarter Pounder with Cheese.

"Customers in the U.S. are noticing a difference," Easterbrook said on a conference call with analysts and investors. He added that McDonald's plans to stick with its current turnaround plan for at least two more quarters before transition to a longer-term strategy.

While the first-quarter results topped Wall Street estimates, Chief Financial Officer Kevin Ozan cautioned that McDonald's continues to expect variability in quarterly results, due to regional economic challenges and other factors.

McDonald's global sales at established restaurants rose 6.2 percent, the biggest leap in three quarters. That was due, in part, to strength markets such as China, Japan and Russia.

The net income attributable to McDonald's rose to $1.1 billion, or $1.23 per share, beating the average analyst estimate of $1.16 per share, according to Thomson Reuters I/B/E/S.

Net revenue fell 1 percent to $5.90 billion, but topped the average estimate of $5.82 billion. The revenue decline was the smallest in seven quarters.

Excluding the impact of a strong dollar, revenue rose 3 percent.

McDonald's, which also has been closing poorly performing units, selling company-run restaurants to independent operators and cutting overhead, said total operating costs fell nearly 10 percent.

Shares in McDonald's which are trading near all-time highs, were up 0.3 percent at $126.17 in midday trading on the New York Stock Exchange.

(Reporting by Yashaswini Swamynathan in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Kirti Pandey and Cynthia Osterman)