Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.
The fast-food titan is having to work hard to win back customers in the U.S.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
McDonald's (MCD +0.00%) recently announced its fastest growth rate in nearly four years, thanks to an encouraging rebound in the U.S. that brought the segment closer to the expansion rate investors have seen in places like Australia and France.
The burger giant notched other important wins in the second quarter, including record profitability and customer service improvements. Still, McDonald's hasn't yet ended the customer traffic slide in its ultracompetitive home market.
In a conference call with investors, CEO Steve Easterbrook and his team discussed their plans for reaching that goal while explaining the key factors driving its positive momentum today. Below are a few highlights from that presentation.
Image source: Getty Images.
Performance drivers for the quarter included proven value and deals such as our national 2 for $5 promotion, featuring our core menu items, as well as other locally relevant offers.
-- CFO Kevin Ozan
The company saw much higher spending by diners in the U.S., thanks to a mix of value-based promotions and menu changes aimed at satisfying changing tastes. The shift to never-frozen quarter-pound burgers, for example, has powered an increase of 55 million sales of that sandwich through the first half of 2019, executives said. McDonald's also saw a nice lift from its remodeling program that upgraded 1,000 stores so far this year.
Still, the second straight acceleration of growth in the U.S. market -- up to 5.7% -- didn't involve higher customer traffic, and management is determined to end that slide soon. "Returning to guest count growth in the U.S. remains a top priority in the street fight for market share," Ozan explained.
Delivery is another area where we're taking bold action to meet customers' expectations for high-quality food on their terms with increasing demands for convenience and speed. We've made significant progress on delivery the past two years and have room to grow in a largely untapped market with great upside.
-- Easterbrook
Fast-food fans are loving the home delivery option, and in places (like Spain and the U.K.) where it's widely available, it accounts for more 10% of sales. That success helps explain why the chain is aggressively adding the option across its global store base, including by reaching over 50% of the U.S. network this past quarter. McDonald's sees the global delivery business passing $4 billion in 2019 while continuing to expand at a fast pace over the next few years.
While we remain confident in our strategies, customers are rewarding us for the investments we're making to offer them great-tasting food, a modern and hospitable environment, and unparalleled convenience.
-- Easterbrook
McDonald's is growing at the fastest rate investors have seen since the launch of all-day breakfast in late 2015. Yet to get to that result, the chain has had to make major changes to its menu and pricing over the last few years while setting a new record for the pace of investments in its real estate. The restaurant giant has also made big strides toward industry-leading functionality on delivery and digital ordering.
"Getting to these results wasn't easy," Easterbrook noted, which implies that management sees a hard fight ahead to try to win market share and eventually return the U.S. market to positive customer traffic. Yet the momentum shareholders have seen over the last few quarters shows that the strategy is working, and could even unlock faster growth as store upgrades continue to flow through its network of over 36,000 restaurants around the world.