McDonald’s US President Chris Kempczinski speaks about the expansion of fresh beef at a McDonald’s event in Oak Brook, Ill., March 5, 2018.
Richa Naidu | Reuters
MC Donalds The rapid recovery from the coronavirus pandemic has led investors to wonder how the fast food giant plans to continue to drive sales growth.
The company is expected to answer some of these questions on Monday. After the company reports its third quarter results, it will hold a virtual meeting with investors to discuss its strategic priorities.
When it bounced back from the pandemic, McDonald’s US sales in the same store were positive last quarterUp nearly 5%, according to a preliminary October release. While transactions remain negative, customers are spending more on their orders.
Franchisees are very optimistic about their six month business outlook and are more confident about their relationship with the franchisor based on the Kalinowski Equity Research survey. The quarterly survey, released October 23, polls a portion of US franchisees on a number of topics, including quantifying their relationship with McDonald’s and their forecast for the business.
With a market value of $ 167 billion, the stock is up 9% this year as of Friday’s close. However, analysts have price targets of up to $ 260 per share, about $ 43 more than before Friday.
Investors will be looking for updates on how McDonald’s is leveraging this momentum to increase sales – or even drive traffic.
The following is likely to be part of McDonald’s investor presentation:
The pandemic has accelerated the push of many restaurant companies to order online, but investors will want more details on how McDonald’s plans to get customers to come back to its app.
Recent collaborations with rapper Travis Scott and reggaeton singer J. Balvin have attracted younger consumers to use the app to order the meals, and analysts expect more partnerships with celebrities in the future.
Analysts believe that Apprente, which uses artificial intelligence to understand drive-through orders, could be system-wide scalable by next year. Andrew Charles, an analyst at Cowen, said in a statement to customers that the technology would increase sales as it would improve the speed of cashiers.
Another focus will be McDonald’s plans to remodel old restaurants and build new ones. The company hasn’t given an outlook on its capital expenditures since former CEO Steve Easterbrook was at the helm more than a year ago.
Current CEO Chris Kempczinski, keen to make his mark on the company’s strategy, told analysts on the company’s second quarter conference call that the company plans to return to “significant unit growth” in Europe, and analysts anticipate the pace of that Slow down conversions. In 2019, McDonald’s spent $ 2.4 billion on investments, with around $ 1.7 billion poured into existing restaurants.
The company could share some menu news too. The much anticipated chicken sandwich is being tested in multiple markets and could be launched next year. Christopher Carril, an analyst at RBC Capital Markets, called this a “potentially significant opportunity”. After all, the popularity of Popeyes’ Chicken sandwich pushed the chain to report double-digit sales growth in the same business, even during the height of the pandemic lockdowns.
The crisis also prompted McDonald’s to cut its menu. While some items have slowly been brought back, the all-day breakfast menu and other items are not back on the menu just yet. The simpler menu has hailed franchisees, but killing too many favorites all the time could drive customers away.