McDonald’s U.S. Comeback Hits A Speed Bump

McDonald’s is not lovin’ it when it comes to stiffening competition in the United States.

The fast-food giant reported same-store sales growth at its U.S. restaurants rose 2.6% in the second quarter, missing Wall Street expectations for 3% in a rare miss by McDonald’s during its turnaround. McDonald’s has been anything but idle in wooing customers in the last two years as it shook off a few years lost to corporate stasis. It is doing things like adding fresh Quarter Pounder hamburgers and teaming up with the likes of Uber Eats to deliver.

McDonald’s has also enthusiastically embraced tech with moves such as introducing digital menu boards that have enhanced how McDonald’s displays its food options in a more enticing manner, and being more flexible in changing up promotions. The restaurant chain, the largest in the world by revenue, has also installed ordering kiosks at many stores, and is using its app to enhance promotions.

So the slow down in the U.S., its biggest market by far, discomfited investors, who sent shares down 2% in early trading.

The slower growth comes as competitors from Starbucks (SBUX) to Dunkin’ Donuts and Panera make their own moves, with tech and with their menus. Dunkin’ for instance now offers its breakfast sandwiches all day, pressuring the benefits McDonald’s has enjoyed since bringing back all-day breakfast in 2015. McDonald’s has responded by offering two breakfast sandwiches for $4.

In other markets, McDonald’s performance was more impressive. In its key international markets such as France, comparable sales rose 4.9%, beating analyst forecasts for 3.9%. Total revenue fell 12% to $5.35 billion because of McDonald’s efforts to sell many restaurants to its franchisees. McDonald’s reported a net income of $1.5 billion, or $1.90 a share, up from $1.4 billion, or $1.70 a share, a year earlier.

Still, there is little reason to believe McDonald’s has run out of ideas. Indeed, the partnership with Uber Eats could be a boon for the chain. In a research note, Neil Saunders, managing director of GlobalData Retail, noted that the partnership is bringing in younger, new customers and that orders have tended to be placed outside of peak store hours.

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