McDonald’s profits jump on better sales, China deal

Net income for the quarter ending September 30 was $1.9 billion, up 47.7 percent from the year-ago period. That included a gain of about $850 million from the sale of China and Hong Kong businesses to franchising companies.

Revenues fell 10.4 percent to $5.7 billion due to the divestments in Asia.

McDonald’s has been on an upswing since tapping Steve Easterbrook as chief executive in 2015 after a lengthy slump.

Easterbrook has been credited with effective roll-outs of the chain’s all-day breakfast option and other new programs, and with efforts to simplify the menu in order to speed visits for customers.

“We’re building a better McDonald’s and winning back customers,” Easterbrook said at the outset of a conference call with analysts.

McDonald’s reported that global comparable sales increased six percent and cited growth in several key markets, including the United States, China, Britain and Canada.

US sales were lifted by some aggressive discounting initiatives, including the McPick 2 value deal, which charged $5 for two meal-sized items, such as the Big Mac and Chicken McNuggets.

Comparable sales in the US rose 4.1 percent despite lower sales in regions hit by Hurricanes Harvey and Irma.

The results “are a testament to both (McDonald’s) resilience and the soundness of its reinvention strategy,” said Neil Saunders, managing director of GlobalData Retail.

“Promotional activity has been key to McDonald’s success within the US,” Saunders said.

“While such activity is not new and helped to drive trade during the second quarter, we are encouraged that it still has resonance given the recent increase in the number of offers and deals from fast food rivals.”

McDonald’s said the refranchising efforts in Asia were ahead of schedule, with some 4,000 restaurants spun off more than a year before the original plan.

The refranchising “brings us closer to the customers and communities we serve in these markets and creates a better opportunity to unlock their full growth potential,” said chief financial officer Kevin Ozan.

“Our more heavily franchised structure will continue to drive shareholder value by providing a more stable revenue and income stream with higher returns on invested capital.”

Shares of McDonald’s rose 1.6 percent to $165.91 in morning trading.