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McDonald's Earnings Beat, Driven by New Chicken Sandwich and Promotion With K-Pop Band BTS

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  • McDonald's topped Wall Street's estimates for its second-quarter earnings and revenue.
  • Strong demand for its BTS meal promotion and new chicken sandwich boosted U.S. same-store sales growth.
  • The fast-food giant also saw its international markets bounce back during the quarter.

McDonald's reported on Wednesday that the chain's Crispy Chicken Sandwich helped U.S. same-store sales outpace 2019 levels by double digits.

U.S. same-store sales climbed 25.9% in the quarter and 14.9% on a two-year basis. The company credited strong sales of its new chicken sandwich, which launched in February, and its "famous orders" promotion with K-pop group BTS, which includes an order of McNuggets and special sauces.

Shares of the company fell 1.7% in premarket trading.

Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $2.37 adjusted vs. $2.11 expected
  • Revenue: $5.89 billion vs. $5.6 billion expected

he fast-food giant reported fiscal second-quarter net income of $2.22 billion, or $2.95 per share, up from $483.8 million, or 65 cents per share, a year earlier.

Excluding strategic gains and U.K. income tax benefits, McDonald's earned $2.37 per share, beating the $2.11 per share expected by analysts surveyed by Refinitiv.

Net sales rose 57% to $5.89 billion, topping expectations of $5.6 billion. Global same-store sales jumped 40.5% from a year earlier and 6.9% on a two-year, pre-pandemic basis.

CEO Chris Kempczinski told analysts that 70% of McDonald's U.S. dining rooms have reopened. If a Covid-19 resurgence doesn't occur, all of its U.S. footprint should have open dining rooms by Labor Day.

"While the delta variant has brought more stops and starts to the Covid story around the world, people are venturing out and establishing new routines," Kempczinski said. "That includes a return to in-person dining."

Outside the U.S., McDonald's has seen a strong recovery in many regions. Its international operated markets segment, which includes the United Kingdom and France, reported same-store sales growth of 75.1% compared with a year earlier, or 2.6% on a two-year basis. McDonald's said that easing restrictions and fewer temporary closures helped sales for that segment.

In the international developmental licensed markets segment, same-store sales were roughly flat on a two-year basis. The division, which includes Brazil and Japan, saw positive same-store sales year on year across all of its regions.

CFO Kevin Ozan said the company is monitoring Covid resurgences around the world, like in Australia, one of the country's top international markets.

Executives also said staffing is a challenge in the United States and Europe, although finding enough workers in its home market has gotten easier. In May, the company announced that workers at U.S. company-owned restaurants would see higher wages. Kempczinski said that restaurants are seeing a higher number of job applications, particularly in states that rolled off pandemic unemployment benefits early.

"I do think that there is evidence that as the federal stimulus rolls off, that you'll see an improvement in the application rate," he said.

Kempczinski also said that the company is seeing "muted inflation" of 1% to 2% this year. Prices have risen 6% compared with a year ago, due to higher labor and food costs. For now, the company is hoping that it can manage inflation in 2022 by taking advantage of its large size and relationships with suppliers.

One issue that's hitting McDonald's supply chain is slow shipping times for sending equipment manufactured in Asia to markets that are adding new restaurants. Executives said that the ongoing global chip shortage is also impacting its equipment orders, so the company has been trying to plan for longer lead times.

Across McDonald's six top markets, the company has reported roughly $8 billion in systemwide digital sales during the first half of the year. As the fast-food chain looks to hold onto the digital sales it gained during the pandemic, it launched a U.S. loyalty program in early July. So far, more than 12 million consumers have joined the program.

The company also raised its full-year forecast. It's now expecting systemwide sales growth in the mid-to-high teens, up from its prior outlook of midteens. For the third quarter, McDonald's is expecting same-store sales growth in its five largest international markets — the U.K., Australia, France, Germany and Canada — that will surpass 2019 levels.

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