McDonald’s Reports 4th Quarter 2018 Results

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McDonalds reported results that were somewhat in line with analyst expectations. In the US, same-restaurant sales were in line at +2.3%.

Outside the US, same-store sales were slightly better than what analysts had expected. This included +5.2% in International Lead Markets, +4.8% in High Growth Markets and +7.1% in Foundational Markets.

Comparable sales were driven by positive pricing and negative traffic.

4th Quarter Highlights

  • Due to the impact of the Company’s strategic refranchising initiative, consolidated revenues decreased 3%. These were flat excluding foreign currency impact.
  • Systemwide sales increased 5% in constant currencies.
  • Consolidated operating income decreased 7% (4% in constant currencies)
  • Adjusted EPS was $1.97, an increase of 15% (18% in constant currencies) over prior year earnings per share (excluding $0.84 per share of prior year net tax cost under the Tax Act).

Conference Call Highlights

  • Company expects margin pressure in 2019 from labor, remodels, commodity inflation and foreign currency translation
  • Most franchisees are still working towards 2020 for renovation completion
  • Market share gains have slowed (100bp gain vs. sandwich peers in 2018 but flat in 4th quarter)
  • Company believes delivery is 70% incremental. Sees 2x average check from delivery orders.
  • In markets where Kiosks have been available, company sees usage at 80-90% of in-store customers.

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