Strong Growth from McDonald's: Shares Rise

McDonald's reported strong sales growth following its campaigns aimed at attracting tough consumers on Wednesday. The company's shares gained value despite its profits not meeting expectations.

The restaurant chain faced a "bifurcated" consumer market, according to CEO Chris Kempczinski, with the introduction of new "Extra Value Meals" in the United States in September.

Kempczinski said in a conference call with analysts, "We continue to be cautious about consumer health in the U.S. and our largest international markets, and we believe that the pressures will last until 2026."

Third-quarter profits rose by 1% to $2.3 billion, while revenues increased by 3% to $7.1 billion.

The company began offering competitive-priced meal bundles in September; for example, the $8 Big Mac meal includes a medium soda and medium fries. In November, sausage and chicken-based bundles are set to be introduced. McDonald's has also engaged in similar efforts in its leading international markets.

The campaigns helped comparable sales in the U.S. rise by 2.4% as of the third quarter, while global growth was recorded at 3.6%.

Kempczinski noted that these promotions have strengthened McDonald's' image of providing "reliable value," while the ongoing inflation in the prices of beef and some other staple food items remains a challenge.

“All of this continues to put pressure on the sector,” he said. “This is an environment you have to fight against when you go out.”

To support the promotions for McDonald's franchises, CFO Ian Borden announced that the company is financing half of the promotion costs. This amount was approximately $15 million for September, and he indicated that they expect this cost to be around $75 million for the fourth quarter.

McDonald's shares gained 2.8% in afternoon trading.