Value meals and new chicken snack boosts McDonald's

 
 
Updated 1/30/2018 4:17 PM
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  • This Monday, April 24, 2017, photo shows the outside of a McDonald's restaurant in downtown Pittsburgh. McDonald's Corp. reports earnings Tuesday, Jan. 30, 2018.

    This Monday, April 24, 2017, photo shows the outside of a McDonald's restaurant in downtown Pittsburgh. McDonald's Corp. reports earnings Tuesday, Jan. 30, 2018. Associated Press

NEW YORK -- Cheap eats, $1 sodas and a new chicken snack helped bring more people to McDonald's, the company said Tuesday.

The world's largest hamburger chain said U.S. sales rose 4.5 percent at established locations during the fourth quarter, thanks to its two-for-$5 deal called McPick 2, soda promotions and new Buttermilk Crispy Tenders. Its delivery service, which it is expanding, also helped. Worldwide, sales rose 5.5 percent at established restaurants.

"We served more customers more often," said CEO Steve Easterbrook.

Value menus have become increasingly important to fast food companies looking to boost sales. Earlier this month, McDonald's replaced McPick 2 by reviving the name of its once-popular Dollar Menu, but this time items cost $1, $2 or $3. About the same time, fellow burger chain Wendy's expanded its four-for-$4 menu, which includes chicken sandwiches, spicy wraps and bacon cheeseburgers.

Easterbrook said it was too early to tell if the $1, $2, $3 Dollar Menu is bringing in more diners.

"We feel good about the Dollar Menu," he said in a call with investors. "It's very early days to comment on anything meaningful."

Neil Saunders, a retail analyst at GlobalData Retail, said that the value meals are a "necessary evil," because, while they bring in more customers, the deals lower profits and hurts sales of pricier items. He added that McDonald's should find a way to increase the number of items it sells, or get people to order more of its pricier items.

On Tuesday, McDonald's also reported better-than expected earnings and revenue for the quarter.

The Oak Brook, Illinois-based company earned net income of $698.7 million, or 87 cents per share, in the three months ending Dec. 31. Adjusted earnings were $1.71 per share, beating the $1.59 per share analysts expected, according to Zacks Investment Research. It reported revenue of $5.34 billion, above the $5.26 billion analysts expected.

McDonald's Corp. shares fell $5.29, or 3 percent, to close at $172.48 Tuesday.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on MCD at https://www.zacks.com/ap/MCD

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