As for the Q3 headline numbers, MCD reported EPS of $2.10, up 19% year/year and comfortably ahead of the $1.99 consensus. Revenue declined 6.7% to $5.37 bln but also exceeded the $5.28 bln expectation. Revenue has now declined on a year/year basis for 17 quarters in a row, which is obviously troublesome. However, the falling revenue is connected primarily to the company’s re-franchising strategy and related efforts rather than to a significant drop in demand. For the past several years now, MCD has been trying to push the percentage of franchised restaurants to 95%. As the end of FY17, the figure stood at about 92%, signaling that McDonald’s is closing in on that goal. While this initiative has a negative impact on the top line, it does lower costs, leading to improved margins and profitability -- which were evident this quarter, with the demonstrated upside EPS result and the 19% growth.
A highlight for MCD continues to be its comparable sales metric. Following last quarter's +4.0% mark, global comparable sales jumped by 4.2% this quarter. In the U.S., comparable sales increased 2.4%, driven by higher average check, which was itself the result of positive product mix shifts and menu price increases. Customers have been trading up to higher priced items, including its fresh beef quarter pounders and its $1, $2, and $3 Dollar Menu add-ons, resulting in higher basket size. MCD does admit, though, that it still has work to do in terms of driving more traffic to its restaurants. In fact, last quarter, global comparable guest counts were down 0.3%, and MCD noted that the comparable sales growth this quarter was again driven by higher check size.
Another positive factor has been the conversion and re-modeling of its U.S restaurants, which it calls "Experience of the Future", or, EOTF. To date, MCD has a total of over 5,000 EOTF restaurants, which is more than a third of its total U.S base. The updated restaurants provide improved hospitality and a more modernized experience for consumers.
MCD has also been aggressively rolling out delivery services in many of its markets. To put the opportunity into perspective, management has stated that there are more than 1 billion people around the world that live less than 10 minutes away from a McDonald's. About a year ago, delivery was made available in 7,800 restaurants around the world, and as of the end of Q2, that number swelled up to 13,000. With the expansion, delivery now represents as much as 10% in certain markets.
To wrap up, MCD has also been returning a substantial amount of capital to shareholders. In Q3 alone, it returned $1.7 bln to shareholders through buybacks and dividends, including a 15% increase in its quarterly dividend. So, all in all, MCD has a performing quite well on a financial basis in a very challenging and competitive market and has also been shareholder friendly through its capital allocation program.