McDonald's says its focus on value -- and a must-have Minecraft meal -- boosted second-quarter sales

Key Points

• McDonald's reported a 5% increase in revenue during the second quarter, amounting to $6.8 billion, surpassing Wall Street's expectations.
• The introduction of the McValue menu and the popularity of a "Minecraft"-themed meal have helped improve sales despite a decline in fast food traffic overall.
• Despite the positive trends, lower-income consumer visits dropped significantly, leading the company to explore strategies to reengage this demographic.
• McDonald's net income rose 11% to $2.25 billion, and the company's adjusted earnings per share matched forecasts at $3.14.

A focus on value — along with hot products like a “Minecraft”-themed meal — helped McDonald’s turn around its sagging sales in the second quarter.

McDonald's Chairman and CEO Chris Kempczinski said Wednesday that the company's McValue menu, which was introduced in January, is bringing some U.S. traffic back to its stores even as industrywide fast food visits have slowed. The menu lets customers buy one item for $1 when they buy a full-priced item, and it draws in different customers than McDonald's $5 meal deal, Kempczinski said.

McDonald's is also seeing a strong response to value meals in Europe and other regions, Kempczinski said.

But the company remains concerned about continuing declines in traffic from consumers with household incomes of $45,000 or less. Fast food visits by lower-income consumers dropped by double-digit percentages industrywide in the U.S. the April-June period.

Kempczinski said lower-income consumers are feeling uneasy about tariffs and their impacts and about the employment outlook. McDonald's is talking with franchisees about ways to reengage those customers, he said.

“Too often, if you’re that consumer, you’re driving up to the restaurant and you’re seeing combo meals priced over $10. And that absolutely is shaping value perceptions in a negative way,” Kempczinski said Wednesday during a conference call with investors. “So we’ve got to get that fixed.”

McDonald's had a big win in April with a meal tied to “A Minecraft Movie,” which was offered in 100 countries, making it the company's largest ever global campaign. McDonald’s said it sold out of its collectible figures in less than two weeks.

McDonald's Chief Financial Officer Ian Borden said chicken — including new products like McCrispy chicken strips in the U.S. and McWings in Australia — also boosted sales. McDonald's increased its chicken market share in each of its 10 biggest markets, Borden said.

It was a far different story than the first quarter, when McDonald's U.S. and global same-store sales slumped as both lower- and middle-income consumers cut back. Kempczkinski said visits from middle-income consumers improved in the second quarter.

Some rivals didn’t fare as well in April-June period. Yum Brands, the parent company of KFC, Taco Bell and Pizza Hut, reported lower-than-expected revenue on Tuesday and said KFC’s same-store sales dropped 5% in the U.S. And last month, Chipotle lowered its full-year same-store sales guidance after a disappointing second quarter that saw same-store sales fall 4%.

McDonald's said Wednesday its revenue rose 5% to $6.8 billion in the April-June period. That was higher than the $6.7 billion Wall Street forecast, according analysts polled by FactSet.

Same-store sales, or sales at locations open at least a year, jumped nearly 4%. Analysts had predicted a 1% decline.

McDonald's shares rose 2% in morning trading Wednesday.

McDonald's net income rose 11% to $2.25 billion in the second quarter. Adjusted for restructuring charges and other one-time items, the company earned $3.14 per share. That was in line with Wall Street's forecast.