BUSINESS & ECONOMICS

Earning Stories – Day Two: AMAZON / McDonalds / Google

A new turnaround plan, saves McDonald’s from ugly decline in revenue

McDonalds, that recently reported a refreshing net profit increase of 23% in the third quarter of 2015, has managed to finally recover from an ugly decline in revenue in 2014. The global fast food chain retailer, that was once the favorite of its consumers across countries, has been struggling in the past few years, due to a ‘menu’ that failed to appeal to Millennials who broadly opt for healthier food with ingredients they trust.

Working forward with a new turnaround plan, Steve Easterbrook, McDonald’s President and Chief Executive Officer, said, “As we begin fourth quarter, comparable sales are expected to be positive in all segments. While still in the early stages, we believe our turnaround plan is starting to generate the change needed to reposition McDonald’s as a modern, progressive burger company.”

Comparable sales for the International Lead Markets segment increased 4.6% for the third quarter led by strong performance in Australia, the U.K. and Canada and positive results in Germany. In the U.S., third quarter comparable sales increased 0.9%, the segment’s first quarterly comparable sales increase in two years. The introduction of the new Premium Buttermilk Crispy Chicken Deluxe sandwich and breakfast, including a return to the classic recipe ingredients for McDonald’s iconic Egg McMuffin, contributed to the segment’s performance.

A sales recovery in China following the prior year supplier issue also added to the company’s higher spirits this quarter, with very strong comparable sales performance in China and positive performance in most other high growth market segments. Operating income increased 39% (68% in constant currencies). Looking at the larger picture, a positive consumer response to multiple menu, service and value initiatives throughout most of the segment contributed to the segment’s performance.

Amazon Prime becomes the driver of growth and profits for Amazon.com

E-commerce retail giant, Amazon.com, from a greater short term loss situation, has emerged as a winner with sharp increase in profits of 118% in the third quarter 2015. The company has always claimed to be growing in losses, as it looked forward to future growth with long term investments plans. This once bizarre theory by the company, has today become a success story, as its net income increased to $79 million, from a net loss of $437 million last year.

Amongst the various highlights that have contributed to the collective growth of the company, some significant influencers have been, Amazon’s introduction of four new tablets, including Fire; three new Fire TV devices, all with Alexa integration; launch of Fire TV and Fire TV Stick Japanese customers; and the overall success of Amazon Prime.

Company’d highlights further included the launch of Prime Video for Japanese customers, along with Prime Music in U.K., giving prime members over one million songs and hundreds of playlists to stream and download for free.

Amazon also introduced Prime Day, a full day of sales that offered Black Friday-type of deals, for the first time last quarter. According to reports, Amazon CFO Brian Olsavsky said, Prime Day contributed 2% to Amazon’s revenue growth globally, which resulted in adding more new Prime members than any other day in company history. He said Prime Day will continue to be a part of Amazon in the future and become a bigger part of the company.

Looking forward, the company also claimed that they would continue to reduce prices for customers to keep the increase of sales in the current quarter, including their lower-priced shipping offers, low-priced sales in fast growing categories, and to add more exclusive good for their Prime members to gain customers’ loyalty.

Google credits substantial growth to increased mobile search revenue

Google, the internet giant which has always been on a keen investors radar, reported a prospering 13% revenue increase in third quarter 2015. Earlier in the month of August, the company released it plans to create a new public holding company, Alphabet, and a new operating structure. As effective since October 2, 2015, the implementation of the holding company reorganization was finally made official, with Alphabet now becoming the successor issuer to Google.

According to the official press release, the company credited its substantial growth to an increase in mobile search revenue, complemented by contributions from YouTube and Programmatic Advertising. Further gains were also observed from a 16% revenue increase in Google websites and 13% in advertising revenues.

Research shows, the ‘other revenues’ in Alphabet’s financial statements might also be coming from from Google Play Store and Google’s own hardware. Android is now by far the most widely used mobile operating system in the world, and Google earns money by selling apps and media to those smartphones and tablets. It recently reported that it had sold 20 million Chromecasts, and has its own line of netbooks, phones, and tablets.

The press release declared that, ‘Had foreign exchange rates remained constant from the third quarter of 2014 through the third quarter of 2015, our revenues in the third quarter of 2015 would have been $1,291 million higher with a constant currency growth rate of 21% year over year.’

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