News

McDonald's financials released

October 24, 2017

McDonald's Corporation today announced results for the third quarter ended September 30, 2017, which showed global comparable sales grew 6 percent with positive guest counts in all segments, a news release said. However, due to the impact of the brand's strategic refranchising initiative, consolidated revenues dropped 10 percent or 12 percent in constant currencies.

"We are serving more customers, more often by offering great tasting food at a good value with the quick service and friendly hospitality they expect from McDonald's," McDonald's President and Chief Executive Officer Steve Easterbrook, said in the release. "Our positive comparable sales and guest counts across all of our operating segments during the third quarter demonstrate broad-based momentum throughout our business that builds upon our strong first half of 2017."

Other third quarter highlights include:

• Systemwide sales increased 7 percent in constant currencies, due to strong comparable sales performance and restaurant expansion.
• Consolidated operating income increased 44 percent, benefitting from approximately $850 million from the sale of the China and Hong Kong businesses.
• Excluding the impact of the gain, unrelated strategic charges and non-cash impairment charges in connection with global G&A and refranchising initiatives, consolidated operating income increased 5 percent primarily due to strong comparable sales performance across all segments.
• Diluted earnings per share of $2.32 increased 55 percent, or excluding other costs $1.76, the diluted earnings per share increased 9 percent. 
• Returned $2.9 billion to shareholders through share repurchases and dividends.
• Increased quarterly dividend 7 percent to $1.01 beginning in Q4.Increased Q3 comparable sales 4.1 percent in the U.S. 
• Comparable sales for the International Lead segment increased 5.7 percent. 

In the Foundational markets, third quarter comparable sales rose 10.2 percent, reflecting positive sales performance across all geographic regions. For the segment, operating income decreased due to the company's refranchising initiatives and higher restaurant technology spending, partly offset by the benefit from comparison to the prior year's strategic charges.

"During the quarter, we refranchised our businesses in China and Hong Kong, reaching our target to refranchise 4,000 restaurants more than a year ahead of schedule," said McDonald's Chief Financial Officer Kevin Ozan. "Completing this transaction brings us closer to the customers and communities we serve in these markets and creates a better opportunity to unlock their full growth potential. Our more heavily franchised structure will continue to drive shareholder value by providing a more stable revenue and income stream with higher returns on invested capital."

Steve Easterbrook said, "Our Velocity Growth Plan is the right strategy for McDonald's to achieve long-term, profitable growth and we are on track to succeed with our commitment and focus on execution. We've made progress in many areas of our business already, including optimizing our restaurant ownership mix and running better restaurants. At the same time, we also are making strides with initiatives such as delivery, mobile order and pay, as well as the Experience of the Future transformation of our restaurants that will make the experience more convenient, personalized and enjoyable for our customers."

Quarters Ended September 30,

Nine Months Ended September 30,

2017

2016

Inc/ 
(Dec)

Inc/ (Dec)

Excluding

Currency

Translation

2017

2016

Inc/ 
(Dec)

Inc/ (Dec)

Excluding

Currency

Translation

Revenues

$

5,754.6

$

6,424.1

(10)%

(12)%

$

17,480.2

$

18,593.0

(6)%

(6)%

Operating income

3,079.4

2,137.3

44

42

7,408.5

5,775.5

28

29

Net income

1,883.7

1,275.4

48

47

4,493.6

3,493.1

29

30

Earnings per share-diluted

$

2.32

$

1.50

55%

53%

$

5.48

$

4.01

37%

38%

Results for the quarter and nine months reflected stronger operating performance and G&A savings. The nine months also benefited from lower depreciation expense, primarily in China and Hong Kong, that in accordance with Held for Sale accounting rules ceased recording depreciation, and improved performance in Japan.

In addition, results for both periods benefited from the Company's sale of its businesses in China and Hong Kong, which closed on July 31, 2017. The Company recorded a pre-tax gain of approximately $850 million related to this sale. For the quarter, this gain was partially offset by $111 million of unrelated pre-tax non-cash impairment charges. Results for 2016 included pre-tax strategic charges of $128 million for the quarter and $357 million for the nine months, consisting primarily of charges related to the Company's global G&A and refranchising initiatives. Excluding the impact of these current year and prior year items, diluted earnings per share increased 9% (7% in constant currencies) for the quarter, and 15% (16% in constant currencies) for the nine months.

Foreign currency translation had a positive impact of $0.02 on diluted earnings per share for the quarter and a negative impact of $0.04 for the nine months.