McDonald’s sees improvement in U.S. traffic as promotions take hold

McDonald’s (NYSE:MCD) is attracting attention with its improving traffic trends set to potentially impacting competitors.

Evercore ISI highlighted that the chain’s same-store sales trends turned positive in the back half of August. The firm thinks the brand can potentially squeeze out slightly positive SSS growth for Q3, despite the year-over-year consensus estimate being -1%. “As we look to 4Q, we believe that McDonald’s value menu and incremental product news with advertising investments will lead to continued market share gains. We believe McDonald’s system is more unified than it was just a few months ago with service metrics improving alongside marketing and value,” noted analyst David Palmer.

In the last four weeks, McDonald’s (MCD) has benefited from positive buzz around its new Collector’s Meal. The “Collector’s Meal,” featuring a choice of breakfast or lunch items along with one of six collectible cups inspired by the chain’s connection to iconic toys, movies, pop culture and more. “Over the years, our fans have built a special connection to McDonald’s collectibles,” noted a press release from McDonald’s (MCD). “From Happy Meal toys to merch, games and cups, these keepsakes are more than just things – they unlock core memories around some of our favorite McDonald’s moments.”

Another traffic driver for McDonald’s (MCD) recently has been the $5 Meal Deal, which launched in late June and came with a 4-piece Chicken McNugget selection, fries, a drink, and the customer’s choice of either a McChicken or McDouble. 70% of McDonald’s (MCD) customers said they ate at the chain in part because of the $5 Meal Deal and 58% of customers said they opted to visit McDonald’s over a different fast-food chain because of the limited-edition meal, per data from Numerator.

The recent burst of sales traffic followed McDonald’s (MCD) first decline in global same-store sales in more than three years. The sales weakness included comparable sales falling 0.7% in the U.S. to miss the consensus estimate for a 1% gain. Comparable sales results were driven by negative comparable guest counts, partly offset by average check growth due to strategic menu price increases. Successful restaurant level execution and continued digital and delivery growth positively contributed to results.

Looking ahead, the Big Arch menu item is being set up to be a permanent part of the McDonald’s (MCD) menu. The fast-food giant is planning to see how the menu addition goes in a few test nations before a large rollout to the U.S. McDonald’s (MCD) originally announced plans to introduce the Big Arch at its annual investor meeting last year in what it said was a response to customer requests for heartier burgers. During a recent earnings call, McDonald’s (MCD) CEO Chris Kempczinski called the Big Arch the chain’s “quintessential” new item, with a twist on the chain’s iconic familiar flavors. The Big Arch is reported to be larger than the traditional Big Mac and features two beef patties, three squares of white cheddar cheese, a tangy sauce, and crispy onions served on a toasted sesame and poppy seed bun. The consensus opinion so far appears to be that the Big Arch is appealing to large hamburger lovers. The nutritional scorecard for the Big Arch indicates that it has 1030 calories, 52 grams of protein, total fat of 66 grams, trans fat of 2 grams, and 1980 milligrams of sodium.