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McDonald’s sales beat as all-day breakfast a hit

Chain to sell 4,000 restaurants to become 95 per cent franchised by 2018


Reuters — McDonald’s Corp. reported better-than-expected quarterly same-restaurant sales as the launch of all-day breakfasts proved to be a hit with diners in the U.S. and demand continued to recover in China.

The world’s biggest restaurant chain’s shares jumped 3.4 per cent in premarket trading on Monday.

McDonald’s introduced all-day breakfasts in October in the U.S., allowing customers to tuck into its popular Egg McMuffins and hash browns any time of the day.

The move was aimed at countering increasing competition from chains such as Wendy’s, Starbucks and Burger King, which have been doubling down on their breakfast offerings.

McDonald’s returned to sales growth in the U.S. in its third quarter after two years of no growth, following new CEO Steve Easterbrook’s turnaround plan that included cutting down on menu items, improving delivery times and refranchising more restaurants.

“In a sign that its turnaround efforts are paying dividends McDonald’s latest results show continued progress,” Neil Saunders, CEO of research firm Conlumino, wrote in a note.

Sales at McDonald’s U.S. restaurants open at least 13 months rose 5.7 per cent, handily beating the average estimate of 2.7 per cent.

“As we enter 2016, we expect continued positive top-line momentum across all segments,” said Easterbrook, who took the helm last year, in a statement Monday.

The company does not break out China sales but said sales in its “high growth” markets, which include Russia and China, rose three per cent.

McDonald’s is recovering in China following a food safety scandal that broke in July 2014 and hammered sales in the country for at least a year.

McDonald’s also said it would refranchise about 4,000 restaurants through 2018 to become 95 per cent franchised, up from its previous target of selling 3,500.

Global same-restaurant sales rose five per cent, above the 3.2 per cent expected by analysts polled by research firm Consensus Metrix.

The company’s net income rose 9.9 per cent to $1.21 billion, or $1.31 per share, in the fourth quarter ended Dec. 31.

Analysts on average had expected earnings of $1.23 per share, according to Thomson Reuters I/B/E/S.

Revenue fell 3.5 per cent to $6.34 billion, mainly due to a strong dollar, but beat the average analyst estimate of $6.22 billion.

McDonalds’ shares have risen 23 per cent in the past six months, outperforming those of rivals Starbucks and Dunkin’ Brands Group.

Reporting for Reuters by Sruthi Ramakrishnan in Bangalore.

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