McDonald’s beats on Q4 earnings, sees digital growth

Yahoo Finance's Brian Sozzi discusses McDonald's earnings and why the fast food chain's app may be its secret weapon.

Video transcript

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- Were you a little surprised by McDonald's blowout sales for the fourth quarter? Of course, you were. Well, maybe you weren't. I don't know. A restaurant posting double digit sales gains with recession fears swirling is no small feat even if you sell value food like McDonald's.

The surprising sales strength caught the attention of Soz. He did a little diving into the company's earnings call.

BRIAN SOZZI: Yeah, I'm always looking for reasons of things for companies, life, well, you name it. And I went back, and I was just rereading our very own Brooke DiPalma's coverage on McDonald's and also the company's earnings call to try to understand where these blowout sales gains came from.

With a lot of pressure on consumer wallets here, I mean, you normally don't see double digit sales gains from McDonald's even considering there is inflation. A couple of things that's-- one thing that stood out to me was the data around digital, McDonald's digital. I was just shocked by some of these numbers here on how fast the digital business is growing from McDonald's, and I think, really playing a key role in driving these double digit sales gains.

Fourth quarter, digital represented 35% of system wide sales McDonald's top six markets. That's pretty huge. Last year, the McDonald's app was downloaded over 40 million times in the US. That is absolutely massive. McDonald's also calling out 50 million active loyalty users in our top six markets. And this really reflects McDonald's app just getting better. Where you can, obviously, pay and order and have all of these things delivered. And they're giving you rewards.

It is just a good app, and that was not the case a couple of years ago. Underscoring this importance, good quote on the conference call from McDonald's CEO, Chris Kempczinski, saying, digital sales gives us such an unlock to get more tailored in the experience, the offer, products, and we're delivering to our customers. And so I think for us, if we can get there on digital, that's going to be a big opportunity.

It looks like that opportunity is, in fact, already starting to play out. And speaking of digital, the company appears to be firing on all cylinders, at least on its earnings day on digital. It was an interesting tweet they put out yesterday from the McDonald's account. That you had Ronald McDonald's being spoken in the same as when you text your ex, and they don't respond. Of course, this has nothing to do with McDonald's digital, but, again, just I think digital top of mind McDonald's. I think that's a pretty creative tweet.

One interesting way to use Ronald McDonald. When I grew up, they used them in commercials. And now they're talking about dating and Ronald.

- Well, I mean, I think they're trying to keep pace with Wendy's and how well they've done on their social accounts as well.

BRIAN SOZZI: Yeah.

- And then when I think about the digital component that you were mentioning a moment ago, I just immediately think to myself, it's me, hi, I'm the problem, it's me. Because at the end of the day, I am the one that's placing so many digital orders. That is the new kind of way that people are saying, you know what? I'm seeing value, but I'm seeing it's still in having the Happy Meal or having those McNuggets delivered via UberEats or just placing an order that way easily and not leaving the comfort of my couch.

And so for those deliveries, I'm probably a line item in some of those.

BRIAN SOZZI: Yeah, no one wants to go drive and pick up McNuggets in this day and age. Just order. But here's my take. And just staying on of all things digital here McDonald's. McDonald's app, good, in my humble opinion. Dunkin app, not good, which is unfortunate.

Dunkin has made a series of updates, and I'm a big Dunkin guy. I'm constantly ordering from there. But I think the rewards program is still very confusing. It is hard to navigate. I encourage everyone to just if you want to better understand this McDonald's digital story, go into the McDonald's app, try, and play around with it. And go to the Dunkin app.

You will see that is a much more slick, easy to use interface from McDonald's perhaps explaining why they're winning a lot of good business. And maybe in terms of coffee, maybe winning some business from Dunkin.

- I've spent a lot of time in that Dunkin app, and I think for all of the app comparisons right now, because users are able to compare McDonald's app, you're able to compare a Domino's app even if you wanted to, and then, additionally, you could weave in Starbucks' app. And all of those different experiences, it's so core to the value experience that somebody, a customer, is taking away.

And that ease of ordering, I think, is what's so imperative for all of these companies to get right. And then try to upsell within that app experience.

- Yeah, I mean I feel like Starbucks and Chipotle are the two that have made it not something that's on the side, not something additional, but just sort of part and parcel of their operations. And so those seem like the models to follow for other companies.