During the company’s investor meeting today, McDonald’s Corporation CEO Jim Skinner and members of senior management outlined the company’s priorities to continue to drive growth in sales, market share, and returns through a strategic focus on its customers and restaurants under the successful Plan to Win. This includes plans to open about 1,000 new restaurants and reimage 2,300 existing locations worldwide in 2010.
“Over the last seven years, we have stayed committed to the Plan to Win and our focus on being better, not just bigger,” Skinner said. “This focus has delivered results as we have consistently exceeded our growth targets.”
McDonald’s constant currency growth targets are: average annual sales growth of 3–5 percent; average annual operating income growth of 6–7 percent; and return on incremental invested capital in the high teens.
“These targets have aligned our system behind growing sales and profitability to generate strong returns,” Skinner said. “They are realistic and sustainable for a company our size and keep us focused on making the best decisions for the long term.”
“We will continue to pursue opportunities to extend our relevance with a particular emphasis on three key areas: service enhancements, restaurant reimaging, and menu innovation,” said chief operating officer Ralph Alvarez. “With service, we will leverage technology to make it easier for managers and crew to quickly and accurately serve the customer. To enhance brand perceptions and drive higher sales and returns, we’re accelerating our interior and exterior reimaging efforts around the world. And we are innovating at every tier of our menu to sustain our momentum and create excitement for our customers.”
“We continue to achieve returns on incremental invested capital that are significantly above our high-teens target, enabling further reinvestment in our business,” said chief financial officer Pete Bensen. “Our future opportunities are significant and, given our strong competitive position, we are increasing capital expenditures in 2010 to $2.4 billion for strategic brand differentiating investments, like reimaging.
“As we accelerate our better, not just bigger strategy to the next level, I’m confident we will continue to grow free cash flow in the future. We intend to return all of this cash to shareholders over the long term via dividends and share repurchases. Through October 2009, we have returned $4.3 billion to shareholders, bringing total cash returned to $15.8 billion under our existing three-year $15 billion to $17 billion target.”
The company’s preliminary 2010 outlook is for its overall basket of goods cost to be relatively flat in the U.S. and Europe. In addition, the company said that currency translation is expected to benefit 2010 earnings per share by 10–13 cents based on current exchange rates.
“Today’s market conditions have accentuated our strengths. The time is ideal for us to further differentiate our brand and grow market share,” Skinner said. “We are determined to keep stretching our business, increasing traffic, and becoming more relevant to a growing number of customers around the world.”
