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Ive read a lot of business memoirs. One I keep coming back to is Grinding It Out by Ray Krocthe man who built McDonalds into the global giant it is today. Kroc was 52 before he even heard of the McDonald brothers who originally started the company. That fact alone says a lot about how he thought: Success comes eventually, but only to those who keep showing up. Which brings me to McDonalds third-quarter earnings call Wednesday. McDonalds reported solid results: global comparable sales up 3.6 percent, U.S. sales up 2.4 percent, revenue of $7.08 billion. The company is outperforming most competitors, but in a brutal environment: Fast-food traffic is down 2.3 percent industry-wide this year, worse than the 1.6 percent drop across all restaurants, according to market-research firm Black Box Intelligence. McDonalds Extra Value Meals now account for about 30 percent of U.S. transactions, the company reported. And, McDonalds spent $40 million this quarter on marketing and expects to provide $90 million in total support to franchisees this year to discount those meals. Thats real money coming out of margins. Wall Street has noticed. But McDonalds CEO Chris Kempczinski said McDonalds will measure its success first by gaining share of lower-income consumer traffic, and second by improving value and affordability experience scores. Traffic first. Profits later. And why is that? Well, Ive written before about how McDonalds is the undisputed champion of nostalgia marketing. It brought back the Hamburglar. It made Grimaces birthday go viral. It launched Adult Happy Meals. It returned the Snack Wrap after fans petitioned for years. Every one of those campaigns was about unlocking core memories in customers. Its a strategy thats paid off, but you cant unlock core memories if they were never created in the first place. A 7-year-old who comes to McDonalds with her family today because they can afford the Extra Value Meal wont be profitable for decades. But 20 years from now, when shes shopping for her own kids and feeling nostalgic? Thats when the investment pays off. Brutal truth: The U.S. economy has split in two. Lower-income consumers are feeling pressure from rising rents, food bills, and childcare, Kempczinski explained. Add uncertainty around SNAP food assistance, and these customers will keep pulling back unless they feel their incomes begin to grow. Meanwhile, higher-income consumers are visiting quick-service restaurants much more often. So while McDonalds is gaining relative share with both groups, the lower-income segmentthe future nostalgia customersis disappearing from the industry. This is where Ray Krocs philosophy matters once more. Because grinding it out sometimes means having the resources to keep going when others cant. And McDonalds truly has advantages that most competitors dont. First, international markets are carrying their weight, and then some. Comparable sales rose 4.3 percent in International Operated Markets (led by Germany and Australia) and 4.7 percent in International Developmental Licensed Markets (led by Japan). Both outperformed the U.S. That geographic diversification gives McDonalds room to breathe while competitors suffocate. Heck, CFO Ian Borden said it directly: Our unique positioning is that weve got the financial strength to make these types of investments, when maybe others are gonna have to be a bit more defensive. Compare that to others in the industry: Chipotle just reported slowing sales. Yum Brands is exploring a sale of Pizza Hut. Investors took Dennys private after several quarters of declining sales. In his remarks during the McDonalds earnings call on Wednesday, Kempczinski brought it full circle back to Kroc: Thats a powerful 13-word sentiment, calling back to a nearly 50-year-old book. Sacrifice margin today to keep families coming through the doors. Bet that keeping kids visiting noweven at discounted priceswill pay off in 2045 when they bring their own kids back. Bet that you can outlast competitors who dont have the same international strength or financial reserves to weather years of pressure. Bet that, eventually, our bifurcated economy heals, anxiety eases, and families feel less squeezed. Theres something almost poetic about a company built on nostalgia thinking at least in part in decades rather than quarters. Thats how nostalgia actually worksits long-term. We look back at the past through rose-colored glasses and remember it better than it really was. Maybe someday, we hope, todays kids will look back fondly. Even if today doesnt always look so rose-colored while were living it. Bill Murphy Jr. This article originally appeared on Fast Companys sister publication, Inc. Inc. is the voice of the American entrepreneur. We inspire, inform, and document the most fascinating people in business: the risk-takers, the innovators, and the ultra-driven go-getters that represent the most dynamic force in the American economy.
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E-Commerce
Wall Street was largely unchanged early Wednesday as markets hovered near record levels on a holiday-shortened trading day.The Dow Jones Industrial Average was up 0.1% as of 9:45 a.m. Eastern. The S&P 500 index was up less than 0.1% and the Nasdaq Composite was down 0.1%.Markets will close at 1 p.m. ET for Christmas Eve and are closed for Christmas. Markets will reopen for a full day of trading on Friday, however volumes are expected to be light this week with the holiday and most investors having closed out their positions for the year.Much of the focus remains on the state of the U.S. economy and where the Federal Reserve will move interest rates. Investors are betting the Fed will hold steady on interest rates at its January meeting.Recent reports show high inflation and shaky confidence among consumersworried about high prices. The labor market has been slowing and retail sales have weakened.The number of Americans applying for unemployment benefits fell last week and remain at historically healthy levels despite some signs that the labor market is weakening.U.S. applications for jobless claims for the week ending Dec. 20 fell by 10,000 to 214,000 from the previous week’s 224,000, the Labor Department reported Wednesday. That’s below the 232,000 new applications forecast of analysts surveyed by the data firm FactSet.Dynavax Technologies soared 38% after Sanofi said it was acquiring the California-based vaccine maker in a deal worth $2.2 billion. The French drugmaker will add Dynavax’s hepatitis B vaccines to its portfolio, as well as a shingles vaccine that is still in development. Sanofi shares were unchanged in the premarket.European markets were moving slightly between slight gains and losses. Asian markets were also quiet, with Hong Kong moving up 0.2% while Japan’s Nikkei 225 fell 0.1%.Both gold and silver futures were higher, with silver prices rising more than 1%. U.S. crude oil rose 0.4% to %58.61 a barrel. Associated Press
Category:
E-Commerce
Nike shares ticked up 2% in premarket trading on Wednesday after Apple CEO Tim Cook bought nearly $3 million worth of the sportswear maker’s stock. Cook, who has served on Nike’s board since 2005 and is its lead independent director, bought 50,000 shares at $58.97 each, according to a regulatory filing published on Tuesday. Nike shares were trading at $58.49 on Wednesday. The purchase comes just days after Nike reported weaker quarterly margins and sluggish sales in China. Its shares have slumped nearly 13% since it reported results on December 18. Cook now holds about 105,000 shares in Nike, as of December 22, the filing showed. Aishwarya Venugopal, Reuters
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E-Commerce
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