Industry News | April 26, 2016

McDonald's is Cruising; Comp Sales Up Big in Q1

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McDonald's Corporation announced results for the first quarter ended March 31, 2016.

In the U.S., first quarter comparable sales increased 5.4 percent, fueled by the ongoing popularity of All Day Breakfast and the introduction of McPick 2—a branded national value platform. Operating income for the quarter rose 15 percent, reflecting higher sales-driven franchised margins, comparison against the prior year's strategic charges, and higher gains from restaurant refranchising.

"McDonald's brand and business is built on offering delicious food and beverages through unmatched convenience and compelling value," says McDonald's president and CEO Steve Easterbrook. "The turnaround plan we announced last year is grounded in enhancing these critical customer-driven elements, and I'm pleased to report that our turnaround is taking hold. The ongoing investments we're making in running great restaurants and delivering what matters most to our customers are beginning to yield sustained positive results. For the quarter, we generated higher sales, revenues, and operating income in constant currencies across all business segments."

Looking ahead, the U.S. business remains focused on finalizing its long-term value platform, investing in core menu enhancements, and simplifying restaurant operations to deliver an outstanding customer experience.

First quarter results also included:

·      Global comparable sales increase of 6.2 percent, which benefited from one additional day due to leap year;

·      Consolidated revenues decrease of 1 percent (increase of 3 percent in constant currencies);

·      Consolidated operating income increase of 28 percent (33 percent in constant currencies), partly due to comparison against the prior year's strategic charges of $195 million;

·      Diluted earnings per share of $1.23, an increase of 46 percent (51 percent in constant currencies), which includes comparison against the prior year's strategic charges totaling $0.17 per share. Excluding the impact of these strategic charges, earnings per share in constant currencies increased $0.26, or 26 percent;

·      Return of $4.5 billion to shareholders through share repurchases and dividends. This brings the cumulative return to shareholders to $20.3 billion against the targeted return of about $30 billion for the three-year period ending 2016.

Comparable sales for the International Lead segment increased 5.2 percent for the quarter, led by strong performance in the U.K., Australia, and Canada as strong execution of core menu, compelling value, and convenience strategies continued to resonate with consumers. First quarter operating income increased 12 percent (18 percent in constant currencies), driven by higher franchised margin dollars. The segment delivered strong results despite ongoing economic and competitive headwinds in France and Germany.

In the High Growth segment, first quarter comparable sales increased 3.6 percent, led by strong comparable sales performance in China and positive performance across various other markets, including Russia. In the Foundational markets, first quarter comparable sales rose 11 percent, primarily due to sales recovery in Japan. Quarterly operating income increases for both segments reflected comparison against the prior year's strategic charges and recovery from the prior year's impact of the 2014 supplier issue—both of which negatively impacted China and Japan's results in first quarter 2015.

"Last week, McDonald's came together for our biennial worldwide convention to galvanize around the actions we're taking to be recognized by our customers as a modern and progressive burger company,” Easterbrook says. “I came away energized by the talented franchisees, suppliers, and employees from around the world who are working to strengthen the fundamentals of running great restaurants to build strong and sustainable momentum. While there is still work to be done, we are on the right path to make even greater progress. I am confident that our continued efforts will deliver meaningful long-term value for all stakeholders into the future."

News and information presented in this release has not been corroborated by QSR, Food News Media, or Journalistic, Inc.

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