McDonald’s China sales boom ahead of spin-off

McDonald’s China sales posted solid quarterly growth ahead of the division’s spin-off. Global same-store sales rose 6.6 per cent in the three months to June 30. In what the company terms its ‘High Growth segment’, second quarter comparable sales increased 7 per cent, led by a strong performance in China. The segment’s operating income rose 28 per cent, with about half of that resulting from lower depreciation expense due to the accounting treatment related to the pending sale of the China and Hong Kong businesses.

McDonald’s CEO Steve Easterbrook was positive about the company’s performance.

“We’re building a better McDonald’s and more customers are noticing. Our relentless commitment to running great restaurants and keeping the customer at the center of everything we do is generating broad-based strength and momentum across our entire business.  For the quarter, we delivered our strongest global comparable sales and guest count results in more than five years.  We’re now introducing our Velocity Growth Plan accelerators in more restaurants around the world, bringing meaningful benefits to more customers through digital, delivery and our Experience of the Future.”

Second quarter highlights

While sales were up, consolidated operating revenues slipped 3 per cent, or 2 per cent in constant currencies, due to the impact of the company’s strategic refranchising initiative.

Systemwide sales increased 8 per cent in constant currencies, due to strong comparable sales performance and restaurant expansion.

Consolidated operating income increased 24 per cent (26 per cent in constant currencies), which included a benefit from the prior year’s strategic charges of approximately $230 million.

US operating income for the quarter increased 5 per cent, reflecting higher sales-driven franchised margin dollars and higher gains on sales of restaurants, among other factors.

“Whilst we’re encouraged by our results from the first half of 2017, we’re not complacent.  Today, we’re acting like a leadership brand, taking on new challenges and opportunities and moving with a greater sense of purpose and urgency,” said Easterbrook.

“We’re building on our momentum, leveraging our size and scale and executing with greater precision against our priorities to retain, regain and convert customers by giving them even more reasons to visit and enjoy McDonald’s.”