MCDONALDS CORP Q4 FY2024 earnings call

Strategy

• Accelerating the ARCHES strategy rooted in customer insights and competitive advantages.

US Performance

• Impact of E. coli outbreak in Q4, sequential improvement in traffic and comps post-incident, with recovery expected by Q2 2025.

International Performance

• Mixed results in IOM with some markets showing improvement (France, Canada, Germany), while UK and Australia face challenges and need more work. IDL showing growth in Middle East and Japan.

Financials

• Adjusted EPS $2.83 in Q4, full-year adjusted operating margin over 46%. CapEx $2.8B, free cash flow conversion 81%.

Global comp sales for 2024 decreased 0.1% full year, with Q4 up 0.4%. US Q4 comp sales down 1.4% due to E. coli outbreak. International Operated Markets (IOM) had slightly positive comps with mixed results, including negative in UK. International Developmental License (IDL) had comp sales over 4% in Q4, driven by Middle East and Japan. Revenue contribution: Global comps, US performance impacted by E. coli, IOM's mixed results, and IDL's strong growth.

2025 Outlook

• Target mid to high 40% operating margin, G&A as % of system-wide sales ~2.2%.
• Expected net restaurant expansion to contribute over 2% to system-wide sales growth.
• CapEx $3-3.2B, plan to open ~2,200 restaurants.
• Foreign currency expected to be a headwind to EPS, totaling $0.20 to $0.30 range.

• Food Safety: E. coli incident in US impacted Q4 performance, reminder of priority on food safety.
• Economic Pressures: Persistent pressure on spending, especially low-income and families in Europe.
• Market-Specific Challenges: UK and Australia facing challenges, not performing to full potential.

Q: Thoughts on McValue in US and guest count/check impacts?

A: Pleased with McValue take rates, seeing improvement in value perception, GC run ahead of check initially but expecting check + GC growth.

Q: US recovery from E. coli and IOM updates?

A: E. coli impact localized, recovery expected by Q2, IOM improving but some markets like UK and Australia need work.

Q: Unit growth and new unit performance?

A: Expect ~2,200 gross openings, 70% in IOM, confident in pipelines and new unit performance.

Q: GBS progress and benefits?

A: GBS in investment phase, no immediate benefits in 2025, but qualitative improvements like reduced hiring time in Australia.

Q: Beverage platform and new products?

A: Bullish on beverage growth, learning from Cosmics test, new food products to come later in 2025.