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McDonald's launches new growth strategy; beats profit estimates

Published 11/09/2020, 07:04 AM
Updated 11/09/2020, 11:05 AM
© Reuters. The logo of a McDonald's Corp restaurant is seen in Los Angeles
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By Uday Sampath Kumar and Hilary Russ

(Reuters) - McDonald's Corp (N:MCD) said on Monday it would test a loyalty program for customers and launch a new crispy chicken sandwich next year as it refocuses its long-term strategy to look beyond the COVID-19 pandemic.

The world's biggest burger chain beat revenue and profit estimates for the third quarter on Monday as customers in the United States ordered more hamburgers and fries in drive-through outlets and on delivery apps to avoid dining out during the pandemic.

Overall, global sales fell 2.2% in the quarter, an improvement over the previous quarter's drop, as McDonald's had already announced in an October update.

The company's limited-time promotional deal with rapper Travis Scott, which caused shortages of some ingredients, and other marketing investments also helped sales bounce back from pandemic lows.

Shares were last 2.3% higher amid broader market gains.

McDonald's plans next year to prioritize marketing, including new packaging globally with a "modern, refreshing feel and playful touches to unify branding" it said in a statement.

McDonald's will focus on core products such as burgers, coffee and chicken, including a new Crispy Chicken Sandwich - something some franchisees have long sought in order to compete with the success of similar products at Popeyes, a unit of Restaurant Brands International Inc (TO:QSR), and Chick-fil-A.

It will also soon include another growth driver that other chains have long had: loyalty programs.

"MyMcDonald's" digital program will allow customers who sign up to get tailored offers, the company said. A loyalty rewards program using the MyMcDonald's program will start as a pilot in coming weeks in Phoenix and next year across the United States.

It will also launch a "McPlant" line of plant-based menu items it will make itself, though it previously tested a vegan "P.L.T." burger by Beyond Meat Inc (O:BYND) in Canada.

Finally, it will build some locations without any dining rooms to focus on carryout, drive-through and delivery only.

Despite some sales recovery and better-than-forecast margins, the company is still pressured in key markets outside the United States, including France, Germany and Britain by new lockdown restrictions due to a spike in coronavirus cases.

McDonald's total revenue fell about 2% to $5.42 billion in the three months ended Sept. 30, largely recovering from the over 30% plunge posted in the second quarter.

Analysts on average had estimated revenue of $5.40 billion, according to IBES data from Refinitiv.

U.S. customer traffic still remained down from a year earlier, the company said.

Net income surged 10% to $1.76 billion, helped by gains from the sale of a part of McDonald's stake in its Japanese affiliate.

© Reuters. The logo of a McDonald's Corp restaurant is seen in Los Angeles

Excluding those gains, the company earned $2.22 per share, beating estimates of $1.90.

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