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McDonald's: 'There's a Big Mac for That' Boosted Results

By Published on .

Credit: Courtesy McDonald's

Need to boost sales? Apparently, there's a Big Mac for that.

In its earnings call Tuesday, McDonald's said serving larger and smaller versions of its iconic Big Mac and lots of $1 coffee helped the fast feeder kick off 2017 on a high note, even though visits to its U.S. restaurants did not increase.

First-quarter U.S. same-store sales rose 1.7%, rebounding after a decline in the fourth quarter of 2016. The latest performance at locations open at least 13 months clearly exceeded the decline of 0.8% analysts had anticipated, according to Consensus Metrix.

The results also suggest the world's largest restaurant chain has been grabbing diners from other chains. Recent promotions and the sustained performance of All Day Breakfast have clearly helped, but its number of visitors in the United States did not increase.

"Frankly, we want those back," CEO Steve Easterbrook said of the lost visits.

During the first quarter, McDonald's offered the larger Grand Mac and smaller Mac. Jr. versions of its Big Mac burger. It advertised the limited-time burgers with a campaign from its new dedicated agency, Omnicom's We Are Unlimited.

The marketing and the agency were not mentioned on today's call. However, Easterbrook did briefly mention the recent hiring of the new U.S. Chief Marketing Officer Morgan Flatley and two other outsiders as examples of how McDonald's is adding fresh perspectives to its executive ranks to help shake things up.

McDonald's continues to make changes to its menu, restaurants, and technology to entice patrons to visit more often. Still, the number of visits to U.S. restaurants, or traffic, still did not increase last quarter. One issue was the first quarter of 2017 had one fewer day than last year when Leap Day gave the chain an extra day of sales. The latest quarterly decline follows four consecutive years of traffic declines at McDonald's through 2016.

Clearly, growing "guest counts" is a top priority for McDonald's, Chief Financial Officer Kevin Ozan said on a conference call. He pointed out that markets including Japan, the U.K. and Canada saw traffic increases in the first quarter, while markets including the U.S. and Germany declined.

McDonald's performance served as a sharp contrast to broader weakness in the U.S. restaurant industry. For example, Brinker International Inc. on Tuesday said Chili's U.S. same-store sales fell 1.7% in the casual dining chain's latest quarter.

Back at McDonald's, a 4% jump in global same-store sales also outpaced the 1.3% increase analysts had anticipated. Profit also came in ahead of Wall Street's expectations.

McDonald's shares rose in Tuesday trading, at one point setting a new high of $141.99.

Now McDonald's is gearing up for next week's national launch of its Signature Crafted line, which offers different premium toppings such as guacamole. While those sandwiches come with a higher price, McDonald's will continue to emphasize value-priced items including drinks and will keep the number of items it adds to its lineup in check.

McDonald's menu innovation plans "won't be reckless," Easterbrook said on the call.

McDonald's is also adding delivery to more areas through a partnership with UberEats. Later this year all U.S. restaurants should be ready for people to order ahead through its app. And next year, it plans to start serving fresh beef in its Quarter Pounder burgers on a national scale after successful tests.

The chain also updated its U.S. uniforms in a bid to modernize its look beyond its restaurant remodeling projects. The new uniforms, created with designers Waraire Boswell and Bindu Rivas, feature shades of gray. They began popping up in marketing materials last year and are now rolling into restaurants nationwide.

McDonald's said the new look is the first time McDonald's U.S. reached out to influential designers to create uniforms, though Rivas already worked on the U.K. division's look. Still, some recall that McDonald's pondered a designer approach years ago. In 2005, McDonald's U.S. was thinking about spicing up its uniforms with help from the likes of Russell Simmons' Phat Farm, P. Diddy's Sean John, American Apparel and others.

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