Industry News | January 23, 2013 | QSR Exclusive Brief

McDonald's Fights for Slight Fourth-Quarter Gains

Though certainly nothing to write home about, burger giant McDonald’s fourth quarter results were tempered, yet positive. The brand saw a slight decline in fourth-quarter comparable traffic, but global comparable sales increased by a slim 0.1 percent, while consolidated revenues went up 2 percent.

And 2012 as a whole was a decent year for the brand, too. Global comparable sales for 2012 increased 3.1 percent, with the U.S. leading with a 3.3 percent increase. Sales in Europe were up 2.4 percent, and the Asia/Pacific, Middle East, and Africa markets saw sales increases of 1.4 percent.

For the full year, consolidated revenues increased by 2 percent, diluted earnings per share went up 2 percent to $5.36, and the brand returned $5.5 billion to shareholders through dividends and share repurchases.

Though 2012 was certainly a challenging year for McDonald’s, the brand remains focused on stabilizing market share in the near term, while laying the foundation for both sustainable and profitable long-term growth, said CEO Don Thompson during an investor’s call Wednesday morning.

“Even though our 2012 performance was softer than recent years, we’ve adapted our plans to be more aggressive and continue to build on the gains that we have made,” he said.

Thompson credits the brand’s year-over-year growth to a trio of factors: menu optimization, a modernized customer experience, and broader accessibility to the brand. “That focus on our customers is particularly critical in this uncertain environment, where ongoing volatility continues to dampen consumer sentiment and spending,” he said.

In the U.S., the brand gave a weaker-than-usual performance in the second half of the year, forcing the concept to shift its focus to reenergizing menu offerings with items such as the Cheddar Bacon Onion sandwich and the return of the popular McRib in December, Thompson said.

In addition, McDonald’s brought variety to the value menu with the addition of the Grilled Onion Cheddar burger at the close of the year.

Thompson promised 2013 would have its share of menu developments, too, including the introduction of Fish McBites, new beef sandwiches, chicken entrées, breakfast items, and beverage offerings.

He said McDonald’s menu strategy, which provides value at each price tier, presents consumers with an affordable entry point and leverages both mid-tier and premium products to increase average spend.

To support this emphasis on value, McDonald’s refocused advertising in the fourth quarter and will continue the approach in 2013. “The marketing calendar will balance large-scale food events, compelling value, ongoing entrée news, and strong local activities,” Thompson said.

With an intensified focus on fundamentals in areas like operations, service, and merchandising, Thompson said the brand is also placing a greater emphasis on scaling successes more quickly around the globe.

In 2013, the brand hopes to see systemwide sales growth of 3–5 percent, and plans to invest more than $3 billion in 1,500–1,600 new units worldwide and makeovers for more than 1,600 locations around the globe.

“Moving forward, we remain focused on seizing the long-term opportunities in the global marketplace by leveraging our competitive advantages,” Thompson said in a statement released Wednesday morning. “We have a brand advantage in convenience, menu variety, and value; a resilient business mode; and the experience and alignment throughout the McDonald’s system to navigate the current environment.”

By Mary Avant