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McDonald's Reports Increase in Sales, Decrease in Revenues, Operating Income

Sales rose 0.9 percent in the U.S.


This morning McDonald's confirmed sales in the past quarter increased for the first time since 2013. Same store sales in the U.S. rose by 0.9 percent; global sales rose by about 4 percent. The last time sales rose for the company was in the third quarter of 2013, according to the AP. McDonald's attributes its sales growth to the introduction of its all-day breakfast menu. The company also cites its launch of the Premium Buttermilk Crispy Chicken Deluxe sandwich as a reason for the rise in sales. MCD shares are trading up as a result of the earnings report.

But McDonald's is not out of the woods yet. Franchisees remain in doubt about the company's future. Earlier this month franchisees told the press the all-day breakfast menu "has slowed down service, lowered average bills and sparked chaos in the kitchens."

The company further reports a consolidated revenues decrease of 5 percent. This, despite the fact that earlier this year the company announced the closure of hundreds of locations. This summer, McDonald's also announced it would be cutting 225 corporate jobs in an effort to restructure. Clearly the company has more slimming down to do if it wants to increase revenues, because people still aren't buying what it has to offer.

This week FourSquare's COO Jeff Glueck unveiled data from the check-in app that showed some troubling trends. The excitement and news reports about McDonald's all-day breakfast menu launch were impossible to miss, and generated an appropriate increase in brand perception and about a 9 percent rise in same store visits. However, when compared to a similar situation — Taco Bell's breakfast launch — history shows that the novelty will wear off and sales will again decline unless, as Glueck says, "McDonald's can somehow build something new into their campaign."

Meanwhile, McDonald's is still on the defense in terms of its operating income, which declined 1 percent. The company attributes this to its "incremental investment in wages and benefits for all eligible Company-operated restaurant employees." If the company is referring to the $1 raise it gave employees of company-owned stores — which is a smaller and smaller fraction of all locations — this excuse will likely irk the ire of groups like Fight for $15, which are demanding the company raise wages to $15 per hour at all locations. It is too soon to attribute the decline to the cities that have moved to raise the minimum wage for fast food workers as these regulations have mostly not yet gone into effect.

At the company's headquarters, CEO Steve Easterbrook put a positive spin on the news: "Third quarter marked an important step in the Company's global turnaround - the reorganization of our business from a geographically focused structure to business segments that combine markets with similar characteristics and opportunities for growth. As we begin fourth quarter, comparable sales are expected to be positive in all segments. While still in the early stages, we believe our turnaround plan is starting to generate the change needed to reposition McDonald's as a modern, progressive burger company." Perhaps Easterbrook should revisit the dictionary definitions of "modern" and "progressive" before he makes statements like these.

Video: Why McDonald's Could Be on the Brink of Failure