McDonald's Results

McDonald's Q1 Global Comparable Sales Up 5.5%

McDonald's Reports First Quarter 2018 Results

McDonald's

McDonald's Corporation today announced results for the first quarter ended March 31, 2018.

"We continued to build upon the broad-based momentum of our business, marking 11 consecutive quarters of positive comparable sales and our fifth consecutive quarter of positive guest counts," said McDonald's President and Chief Executive Officer Steve Easterbrook. "More customers are recognising that we are becoming a better McDonald's, appreciating our great tasting food, fast and friendly service and compelling value as we execute our Velocity Growth Plan."

First quarter highlights:

  • Global comparable sales increased 5.5% and global comparable guest counts increased 0.8%
  • Due to the impact of the Company's strategic refranchising initiative, consolidated revenues decreased 9% (15% in constant currencies)
  • Systemwide sales increased 7% in constant currencies
  • Consolidated operating income increased 5% (flat in constant currencies) due to growth in franchised margin dollars, offset by the impact of the Company's strategic refranchising initiative
  • Diluted earnings per share of $1.72 increased 17% (12% in constant currencies), reflecting $0.07 per share of additional income tax expense associated with adjustments to the provisional amounts recorded in December 2017 under the Tax Cuts and Jobs Act of 2017 ("Tax Act"). Excluding this impact, diluted earnings per share was $1.79, an increase of 22% (16% in constant currencies)
  • Returned $2.5 billion to shareholders through share repurchases and dividends

In the U.S., first quarter comparable sales increased 2.9% driven by growth in average check resulting from menu price increases and product mix shifts. Operating income for the quarter increased 5%, reflecting higher franchised margin dollars and higher gains on sales of restaurant businesses, partly offset by lower Company-operated margin dollars.

Comparable sales for the International Lead segment increased 7.8% for the quarter, reflecting positive results across all markets, primarily driven by the U.K. and Germany. The segment's operating income increased 21% (9% in constant currencies), fueled by sales-driven improvements in franchised margin dollars.

In the High Growth segment, first quarter comparable sales increased 4.7%, led by strong performance in China and Italy and positive results across most of the segment, partly offset by continued challenges in South Korea.

In the Foundational markets, first quarter comparable sales rose 8.7%, reflecting positive sales performance across all geographic regions.

Steve Easterbrook concluded, "We're keeping the customer at the centre of everything we do as we continue enhancing their McDonald's experience. Guided by our Velocity Growth Plan, we are satisfying the rising expectations customers have for the taste and quality of our food and greater convenience as they visit our restaurants or enjoy meals delivered to their homes and offices. We are confident in the strategies guiding our business for today and for long-term sustained growth into the future."

KEY HIGHLIGHTS - CONSOLIDATED

Dollars in millions, except per share data

Quarters Ended March 31,

2018

2017

Inc/

(Dec)

Inc/ (Dec)

Excluding

Currency

Translation

Revenues

$

5,138.9

$

5,675.9

(9)%

(15)%

Operating income

2,143.1

2,034.0

5

0

Net income

1,375.4

1,214.8

13

8

Earnings per share-diluted

$

1.72

$

1.47

17%

12%

Results for the quarter reflected an increase in sales-driven franchised margin dollars and the benefit from a lower effective tax rate, partly offset by lower Company-operated margin dollars driven by refranchising.

Results included approximately $52 million, or $0.07 per share, of additional income tax expense associated with adjustments to the provisional amounts recorded in December 2017 under the Tax Act. Excluding these adjustments, net income was $1,427.7 million, an increase of 18% (12% in constant currencies), and diluted earnings per share was $1.79, an increase of 22% (16% in constant currencies).

Foreign currency translation had a positive impact of $0.08 for the quarter on diluted earnings per share.

McDONALD'S CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

Dollars and shares in millions, except per share data

Quarters Ended March 31,

2018

2017

Inc/ (Dec)

Revenues

Sales by Company-operated restaurants

$

2,535.6

$

3,411.9

$

(876.3)

(26)%

Revenues from franchised restaurants

2,603.3

2,264.0

339.3

15

TOTAL REVENUES

5,138.9

5,675.9

(537.0)

(9)

Operating costs and expenses

Company-operated restaurant expenses

2,130.9

2,816.4

(685.5)

(24)

Franchised restaurants-occupancy expenses

480.3

430.1

50.2

12

Selling, general & administrative expenses

533.1

521.3

11.8

2

Other operating (income) expense, net

(148.5)

(125.9)

(22.6)

(18)

Total operating costs and expenses

2,995.8

3,641.9

(646.1)

(18)

OPERATING INCOME

2,143.1

2,034.0

109.1

5

Interest expense

236.8

218.6

18.2

8

Nonoperating (income) expense, net

18.4

7.9

10.5

n/m

Income before provision for income taxes

1,887.9

1,807.5

80.4

4

Provision for income taxes

512.5

592.7

(80.2)

(14)

NET INCOME

$

1,375.4

$

1,214.8

$

160.6

13%

EARNINGS PER SHARE-DILUTED

$

1.72

$

1.47

$

0.25

17%

Weighted average shares outstanding-diluted

798.7

825.2

(26.5)

(3)%

n/m Not meaningful



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