Analysts See Swift, Sizable Payoff for McDonald's New Efforts
OAK BROOK, Ill. — McDonald's efforts to streamline and update its business model through adding initiatives such as delivery and new store formats are likely to result in a major payoff, according to Wells Fargo restaurant and foodservice analysts.
This follows growth in both sales and the company's stock price, which has growth of nearly 30 percent in the last year, reported Fox Business.
The chain reported a 4-percent increase in global same-store sales during the first quarter of 2017, with a 1.7-percent bump in U.S. sales. Adjusted earnings rose 19 percent as revenues contracted during refranchising efforts.
McDonald's Experience of the Future Initiative could drive sales growth of 1 percent at stores open for at least 12 months as early as next year, judging by the mid-single digit increase in same-store sales that its rollout has prompted in restaurants in Canada and the United Kingdom. Delivery could represent a 2- to 3-percent increase in per-share profit growth by 2018, according to a team of Wells Fargo analysts led by Senior Analyst Jeff Farmer.
The Oak Brook, Ill.-based company is also bringing its delivery program, which launched in January through a partnership with UberEATS at 200 Florida restaurants, to a wider audience. It has since rolled out to 2,500 locations and expects to reach 3,500 by the end of June, as CSNews Online reported.
Other recent initiatives include all-day breakfast, a smaller menu, fresh beef testing, touchscreen kiosks, mobile ordering and payment
"It's still early days, but [McDonald's] delivery performance has impressed, including 60 percent of sales after 4 p.m. and a delivery check that is two times larger than average," Wells Fargo analysts said in a research note.
The team added that they anticipate delivery additions to peak at 12,000 units, which could provide a 1.1-percent rise in same-store sales by the final quarter of 2019.
McDonald's stock shares rose to an all-time high of $155.46 at the opening bell on June 26, increasing 0.5 percent.