McDonald's gets sales lift from cheaper menu, new launches

McDonald's (MCD.N) beat Wall Street estimates for quarterly results on Monday, powered by new launches, promotions and demand for its more affordable burgers and fries from diners struggling with still-high prices of food and essentials.

Shares of the company opened 2% higher as it boosted full-year margins expectations, on the back of declining costs of commodities like vegetables and proteins.

McDonald's size and scale have helped keep its meals relatively more affordable even after the industry-wide hike in prices last year, helping counter the trend of inflation-hit consumers eating more at home and a broader decline in footfall.

The company has also rolled out to other markets its smaller, more affordable meal bundles featuring its core menu items after testing them in markets such as Germany.

"Consumers continue to be more discriminating about what and where they spend...(but) we're seeing really no change at all in terms of customer acceptance... on pricing," CEO Chris Kempczinski said on a post-earnings call.

In fact, McDonald's posted traffic growth among lower-income consumers even as industry-wide footfall declined, Kempczinski said.

Drawing on its history of menu enhancements, the burger giant launched the Cheesy Jalapeno Bacon quarter pounder in July and brought back the fan-favorite Spicy Chicken McNuggets to menus in September.

McDonald's has done a "fantastic job" in returning to menu items that have performed well over time to boost sales and margins, Stephens analyst Joshua Long said.

Global comparable sales jumped 8.8% in the third quarter ended Sept. 30, while analysts on average had expected a 7.36% rise, according to LSEG data.

"The value, the affordability, and just the consistency that the McDonald's brand can bring to the consumer" would further fuel sales momentum in the rest of the year, Long added.

U.S. comparable sales climbed a better-than-expected 8.1%, while same-store sales in its international operated markets also edged past estimates.

Adjusted per-share profit of $3.19 beat estimates of $3.00.