McDonald’s Cactus Plant Flea Market boosts sales

Within four days of launching its Cactus Plant Flea Market Box, McDonald's customers had bought up 50% of the fast-food chain's supply of collectible toys. The limited-edition promotion—positioned as an adult Happy Meal and created in partnership with the buzzy streetwear brand—has driven increased traffic and sales at the Chicago-based company's U.S. locations, CEO Chris Kempczinski said during McDonald's earnings call this morning. It also drove the company’s highest number of weekly digital transactions ever in the U.S., and U.S. comparative sales—a hotly watched growth measure in the retail world—are expected to be in the low double digits in October. See McDonald's first Cactus Plant Flea Market ad It's a boost as McDonald's works to keep inflation-weary consumers coming back. The chain reported sales that handily beat expectations in the third quarter as diners proved willing to pay more for their fries and burgers—a sign McDonald's offerings are resonating with consumers amid rising inflation. Ad Age Next: CMO Get your tickets for the Dec. 7 event in New York Register here The Cactus Plant Flea Market box, which includes a collectible toy, plus Chicken McNuggets or a Big Mac, fries and a drink, launched in early October, and any sales it drove would not have shown up in third-quarter earnings. Still, Kempczinski said it is helping boost U.S. sales. "If you're having to look with a microscope to see the impact of your marketing on your (profit and loss statement), then it's not big enough," Kempczinski said. "Our marketing programs show up as significant, meaningful (comparative sales) drivers for us. That's what gives us confidence we're finding the right engagement with consumers." Same-store sales, a key indicator for restaurants and retailers, rose 9.5% in the quarter, surpassing the 5.8% gain that was the average of estimates compiled by Bloomberg. Earnings of $2.68 per share also exceeded analysts’ projections. McDonald’s is facing inflation-weary diners across the globe, so the quarter's strong results underscore how the company is picking up customers as rivals across the industry raise prices. The chain said U.S. guest counts increased in spite of higher menu prices, with online and mobile sales, core items and delivery bolstering performance. Echoing comments from Chipotle Mexican Grill Inc. earlier this week, Kempczinski referred to macroeconomic “uncertainties”—the latest sign that companies are having trouble forecasting the immediate future. Nonetheless, McDonald’s is “operating from a position of competitive strength,” Kempczinski said during the earnings call. “We expect to experience a mild to moderate recession in the U.S. and one that will potentially be a little deeper and longer in Europe,” he said. “We're laser-focused on meeting the changing needs of our customers.” U.S. comparative sales were 6.1% in the third quarter, driven by higher average check sizes and guest counts that were higher than in the second quarter, said Ian Borden, who was speaking on the earnings call for the first time in his new role as CFO. Year-over-year price increases in the third quarter were just over 10% in the U.S. McDonald's is seeing lower-income customers shift to value items amid rising inflation, Borden said. Higher costs related to ingredients and labor are still an issue—earnings per share declined 6% from last year, even if they surpassed analysts’ average estimate of $2.57. A strong dollar against other currencies eroded some profitability. While menu price increases and value items are helping fuel sales in McDonald’s home market, the chain is still struggling with COVID-19 restrictions in China. Revenue was $5.87 billion, above the average estimate of $5.71 billion. Operating income also surpassed estimates. Bloomberg contributed.

McDonald’s Cactus Plant Flea Market boosts sales

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