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No signs of slowing down for McDonald's in 2012

November 10, 2011

McDonald's Corp. stock has risen more than 20 percent so far this year, and the company has no intentions of slowing down in 2012. During its investor meeting Thursday, CEO Jim Skinner said McDonald's will spend about $2.9 billion next year, providing for more than 1,300 new restaurant openings and more than 2,400 reimages.

Skinner and other members of the senior management team reiterated the company's "Plan to Win" to investors, outlining efforts to modernize the brand, enhance customer relevance and sustain performance for the future.

"Over the past nine years the Plan to Win has been the right blueprint for McDonald's and remains relevant today. It has enabled us to perform well in both robust and challenging economic environments. Most importantly, the plan is supported by our unparalleled competitive advantages in size and scale, our financial strength and our system alignment," Skinner said.

The QSR giant anticipates the following for 2012:

• Capital expenditures of about $2.9 billion, providing for more than 1,300 new restaurant openings and over 2,400 reimages;
• Commodity cost forecast reflecting an increase in the company's overall basket of goods of 4.5 percent to 5.5 percent in the U.S. and 2.5 percent to 3.5 percent in Europe;
• A 7 percent increase in G&A in constant currencies driven by certain technology investments to accelerate future restaurant capabilities and the timing of the 2012 Olympics and Worldwide Owner/Operator convention.

Don Thompson, COO, said efforts will be intensified behind three global priorities specifically: Optimizing and evolving the menu; modernizing customer experience; and broadening accessibility to the brand.

Chief financial officer Pete Bensen added that McDonald's is operating from a position of strength, making now the right time to accelerate new store openings and reimaging efforts.

"We have the financial resources and discipline to invest wisely, and given our strong returns we are increasing our capital expenditures to about $2.9 billion for 2012," he said. "The first priority for our significant cash flow remains reinvesting in our business to be increasingly relevant to our customers. After that, we expect to return all of our free cash flow to shareholders over the long term through a combination of dividends and share repurchases."

Through October 2011, McDonald's has returned $5.1 billion to shareholders. The company expects to finish the year around $6 billion.

The company also reaffirmed its constant currency growth targets for this year, including an annual sales growth of 3 percent to 5 percent; an average operating income growth of 6 percent to 7 percent; and a return on incremental invested capital in the high teens.

"McDonald's commitment to and outstanding execution of the Plan to Win has created significant brand differentiation and strong business momentum," Skinner said. "McDonald's long-term growth targets have served us well and remain intact going forward. They are realistic and sustainable for a company of our size, particularly as we invest to widen our competitive advantages and stretch our brand."

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