McDonald's sales top forecasts after promotions push

By Sruthi Ramakrishnan

(Reuters) - McDonald's Corp same-store sales beat expectations in the third quarter, proving that cheap food offers and a push into healthier options and customizable premium burgers were beating back competition from fast-casual chains.

The world's largest fast food chain by revenue has been working to reverse lower traffic at its U.S. restaurants, where it gets most of its profit, under pressure from chains like Chipotle Mexican Grill Inc and Panera Bread.

An overhaul in the past year has introduced fresh beef Quarter Pounders, premium customizable sandwiches such as the Signature Sriracha, as well as mobile ordering and delivery.

The company's quarterly results on Tuesday showed global comparable sales rose 6 percent, beating the 4.5 percent increase expected by analysts.

"Given that the fast food and casual dining segments as a whole struggled over the third quarter, this is an encouraging set of results which suggests McDonald's is gaining both market and customer share," said Neil Saunders, managing director at industry researchers GlobalData Retail.

Aggressive value promotions in the United States included offering soft drinks of all sizes for $1, McCafe beverages such as smoothies and espresso drinks for $2, and the McPick 2 offer, which lets customers buy two menu items for $5.

The changes, part of a turnaround plan under Chief Executive Steve Easterbrook, come after Chipotle and other chains raised the bar on what ordinary consumers can expect from mass market fast-food outlets.

Fast-food rivals such as Wendy's Co and Burger King, also squeezed by the trend, have also been working hard to keep customers with different menus and deals.

Same-store sales - McDonald's U.S. restaurants that have been open for at least 13 months - rose 4.1 percent in the quarter ended Sept. 30, above the 3.4 percent growth expected on average by analysts polled by research firm Consensus Metrix.

The company's shares, which had risen 4 percent this month, were up 1 percent soon after opening in New York, having hit a record high on Friday.

Strong performance across markets such as China, U.K. and Canada also helped the sales numbers and underlying profit.

Excluding items, McDonald's earned a profit of $1.76 per share, only just missing an average analyst estimate of $1.77 per share, according to Thomson Reuters I/B/E/S.

Total revenue beat forecasts but overall was down 10.4 percent at $5.75 billion due to a step up in franchising of its restaurants which provides the company with less revenue but saves on costs. Analysts were expecting revenue of $5.74 billion.

McDonald's Chief Financial Officer Kevin Ozan said the company had completed refranchising of 4,000 restaurants in China and Hong Kong more than a year ahead of schedule.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Patrick Graham)