Sign in

    McDonald's Corp (MCD)

    Business Description

    McDonald's Corporation is a global leader in the fast-food industry, primarily franchising and operating restaurants in over 100 countries . The company offers a locally relevant menu of quality food and beverages, including hamburgers, cheeseburgers, chicken sandwiches, fries, and breakfast items like the Egg McMuffin . McDonald's generates revenue from sales at company-operated restaurants and fees from franchised restaurants, which include rent and royalties . The heavily franchised business model ensures stable and predictable revenue streams .

    1. U.S. Segment - Operates and franchises McDonald's restaurants in the United States, offering a menu tailored to American tastes.
    2. International Operated Markets - Manages company-operated and franchised restaurants in various international markets, adapting the menu to local preferences.
    3. International Developmental Licensed Markets & Corporate - Oversees restaurants in regions where McDonald's operates under developmental licenses or affiliate structures, focusing on strategic growth and corporate functions.
    4. Menu Offerings - Features a diverse range of food items, including iconic products like the Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, Chicken McNuggets, and McCafé beverages, with variations to suit local tastes.

    Q3 2024 Summary

    Initial Price$254.83July 1, 2024
    Final Price$302.98October 1, 2024
    Price Change$48.15
    % Change+18.89%

    What went well

    • Successful implementation of the $5 Meal Deal in the U.S. drove positive comp guest counts and improved brand perceptions around value and affordability, particularly engaging lower-income consumers.
    • Strategic combination of compelling value offerings with food innovation, such as the Chicken Big Mac, and strong marketing campaigns like the Collector's Edition, resulted in increased average check and profitability.
    • Early signs of progress in international markets, with McDonald's gaining traffic share even in contracting QSR industries, and continued investment in digital and technology to drive long-term growth.

    What went wrong

    • Declining Margins Due to Cost Pressures: McDonald's company-operated margins were lower in the third quarter due to muted top-line growth and cost pressures, including mid-single-digit wage increases and commodity inflation. These pressures may impact profitability in the near term.
    • Impact of Food Safety Issues on Brand Trust: The recent E.coli outbreak linked to slivered onions has adversely affected sales and customer trust. McDonald's acknowledges the need to restore consumer confidence, which may require reallocating resources and could impact short-term performance.
    • Challenging International Market Conditions: International markets are experiencing industry contraction, with declining traffic in key markets like the U.K., France, Germany, and Australia. Consumers, especially lower-income customers and families, are under pressure, affecting sales growth. The company is not fully satisfied with the pace of improvement and acknowledges more work is needed to drive growth in these markets.

    Q&A Summary

    1. Food Safety Impact
      Q: How has the food safety incident affected sales?
      A: The food safety incident led to daily negative sales and guest count results since it began. Before the incident, the U.S. business had strong momentum, with comp sales close to mid-single-digit positive and positive guest counts in the first three weeks of October. McDonald's believes the most significant events are behind them and is focused on restoring consumer confidence and returning to strong momentum.

    2. U.S. Value Strategy
      Q: What is the effect of the $5 Meal Deal on traffic?
      A: The $5 Meal Deal improved value perception and helped McDonald's gain share with lower-income consumers for the first time in over a year. Customers buying the $5 Meal are visiting more frequently, driving guest count growth. When combined with exciting menu items like the Chicken Big Mac, the company saw strong check growth and profitability.

    3. Future Value Platform
      Q: What are plans for a permanent value platform?
      A: McDonald's plans to launch a more holistic value platform in the first quarter of 2025. This will include entry-level price points, meal deals like the $5 Meal Deal, and digital offers, all under a branded platform similar to those in other markets. Discussions with franchisees are ongoing to finalize the details.

    4. International Market Performance
      Q: How are international markets performing amid challenges?
      A: International markets are facing a challenging environment with industry contraction and pressured consumers, especially lower-income families. McDonald's is focusing on value and affordability to drive market share. While seeing early signs of progress and positive comp gaps versus competitors in some markets, the company aims to strengthen value programs and enhance marketing to accelerate growth in 2025.

    5. Margin Outlook
      Q: How is value strategy impacting margins?
      A: The focus on value offerings like the $5 Meal Deal is putting short-term pressure on margins due to lower average checks and cost pressures like mid-single-digit wage inflation and commodity costs. However, McDonald's expects to grow margins over the mid to long term by driving stronger traffic and volume growth through value offerings combined with menu excitement.

    6. Pricing Power and Inflation
      Q: Will McDonald's price in line with inflation next year?
      A: McDonald's acknowledges that consumers are resistant to price increases, especially in international markets. The company plans to be thoughtful about incremental pricing actions, potentially pricing below inflation. They aim to influence mix positively through marketing and menu innovations rather than relying solely on price increases.

    7. Store Development Plans
      Q: Is the sales environment affecting unit growth plans?
      A: McDonald's continues to see good returns on new units and is on pace to meet development goals in the U.S. The current sales environment has not impacted development plans, and the company believes the long-term opportunity remains intact.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Sales by Company-operated2,224.32,487.02,556.22,474.19,741.62,3552,4612,656
    Revenues from Franchised3,587.53,933.34,047.13,868.615,436.53,7233,9404,094
    - Rents--2,569.6---2,523-
    - Royalties--1,461.9---1,402-
    - Initial Fees--15.6---16-
    Other Revenues86.077.288.963.5315.69189124
    Total Revenue5,897.86,497.56,692.26,406.225,493.76,1696,4906,873
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    U.S.2,487.62,653.92,704.02,722.910,568.42,5602,6982,739
    International Lead Markets--------
    High Growth Markets--------
    Foundational Markets & Corporate--------
    International Operated Markets2,794.83,125.73,300.53,16112,382.02,9873,1473,309
    International Developmental Licensed Markets & Corporate615.4640.7687.7599.52,543.3621645825
    - Company-operated Sales--------
    - Franchised Revenues--------
    - Other Revenues--------
    Europe--------
    APMEA (Asia/Pacific, Middle East, and Africa)--------
    Other Countries & Corporate--------
    Total Revenue5,897.86,420.36,692.26,483.425,493.76,1696,4906,873
    KPIs - Metric (Unit)FY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    90-Day Active Users (million)5052150150-1503737
    Systemwide Sales to Loyalty Members ($ billion) Q1 20237.5--6-678
    Franchised Restaurant Margins ($ million)2,989.33,315.13,421.73,235.9-3,0963,3113,447
    Company-Owned and Operated Restaurant Margins ($ million)301.2395.7421.2--320387407

    Executive Team

    NamePositionStart DateShort Bio
    Jonathan BannerExecutive Vice President – Chief Global Impact OfficerSeptember 2022Jonathan Banner has been the Executive Vice President – Chief Global Impact Officer at McDonald's since September 2022. Before joining McDonald's, he was Executive Vice President, Communications for PepsiCo, Inc. from May 2014 to August 2022 .
    Ian BordenExecutive Vice President – Global Chief Financial OfficerSeptember 2022Ian Borden has been the Executive Vice President – Global Chief Financial Officer at McDonald's since September 2022. He previously served as President, International, and has been with the company for 29 years .
    Heidi CapozziExecutive Vice President – Global Chief People OfficerApril 2020Heidi Capozzi has been the Executive Vice President – Global Chief People Officer at McDonald's since April 2020. Prior to joining McDonald's, she was Senior Vice President of Human Resources for The Boeing Company .
    Joseph ErlingerExecutive Vice President – President, McDonald's USANovember 2019Joseph Erlinger has been the Executive Vice President – President, McDonald's USA since November 2019. He has been with the company for 21 years .
    Morgan FlatleyExecutive Vice President – Global Chief Marketing Officer and New Business VenturesFebruary 2023Morgan Flatley has been the Executive Vice President – Global Chief Marketing Officer and New Business Ventures at McDonald's since February 2023. She previously held various marketing roles at McDonald's and PepsiCo, Inc. .
    Marion GrossExecutive Vice President – Global Chief Supply Chain OfficerSeptember 2022Marion Gross has been the Executive Vice President – Global Chief Supply Chain Officer at McDonald's since September 2022. She has been with McDonald's for 30 years .
    Catherine HoovelSenior Vice President – Corporate ControllerJuly 2021Catherine Hoovel has been the Senior Vice President – Corporate Controller at McDonald's since July 2021. She has been with the company for 27 years and is set to retire on October 1, 2024 .
    Christopher KempczinskiPresident and Chief Executive OfficerNovember 2019Christopher Kempczinski has been the President and Chief Executive Officer of McDonald's since November 2019. He joined McDonald's in 2015 and will assume the role of Chairman of the Board following the 2024 Annual Shareholders' Meeting .
    Jill McDonaldExecutive Vice President – President, International Operated MarketsSeptember 2022Jill McDonald has been the Executive Vice President and President of International Operated Markets at McDonald's since September 2022. She previously served as CEO for Costa Coffee and Managing Director for Marks and Spencer Group plc .
    Desiree Ralls-MorrisonExecutive Vice President – Global Chief Legal Officer and SecretaryApril 2021Desiree Ralls-Morrison has been the Executive Vice President, Global Chief Legal Officer, and Secretary at McDonald's since April 2021. She previously held similar roles at Boston Scientific Corporation and Boehringer Ingelheim USA Corporation .
    Brian RiceExecutive Vice President – Global Chief Information OfficerAugust 2022Brian Rice has been the Executive Vice President – Global Chief Information Officer at McDonald's since August 2022. He previously served as Executive Vice President, Chief Information Officer, and Global Business Services for Cardinal Health, Inc. .
    Jo SempelsSenior Vice President and President, International Developmental Licensed MarketsSeptember 2022Jo Sempels has been the Senior Vice President and President, International Developmental Licensed Markets at McDonald's since September 2022. He has been with the company for over 30 years .
    Manu SteijaertExecutive Vice President – Global Chief Customer OfficerAugust 2021Manu Steijaert has been the Executive Vice President – Global Chief Customer Officer at McDonald's since August 2021. He has been with the company for 21 years .
    Miles WhiteLead Independent DirectorN/AMiles White is the Lead Independent Director at McDonald's. He has extensive experience from his previous roles at Abbott Laboratories and has been on McDonald's Board for 14 years .
    Mike HsuNominated as Independent Director of the BoardFollowing 2024 Annual Shareholders' MeetingMike Hsu is a nominee for the Independent Director position on the Board of McDonald's. He is currently the Chairman and CEO of Kimberly-Clark Corporation, a role he has held since 2020 .

    Questions to Ask Management

    1. Given the negative global comp sales in the third quarter and the challenging industry environment, what specific strategies are you implementing to drive sustainable guest count-led growth internationally, and how confident are you in their execution? , ,

    2. With the recent E.coli incident affecting consumer confidence and causing negative sales trends in the U.S., what measures are you taking to restore trust and ensure food safety moving forward, and how might this impact your marketing and advertising strategies? , ,

    3. The $5 Meal Deal has driven traffic and improved value perceptions in the U.S., but how sustainable is this approach for franchisee profitability, and do you anticipate needing to adjust your value offerings in response to margin pressures? , ,

    4. In international markets like France and the U.K., you've faced challenges with value and affordability leading to negative comp sales; how will you address these issues, and can successful strategies from the U.S. be effectively applied internationally? , ,

    5. Considering the contraction in the QSR industry and pressures on lower-income consumers, how do you plan to balance offering compelling value propositions with maintaining franchisee profitability, especially amid rising costs and potential margin impacts? , ,

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateDecember 31, 2019
    End Date/DurationN/A
    Total additional amount$15 billion
    Remaining authorization amount$3,968,932,958
    DetailsReturn excess cash flow to shareholders through share repurchases and dividends.

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Interest Expense: Expected to increase by approximately 11% for the full year .
      2. Adjusted Effective Tax Rate: About 21% for the quarter .
      3. Dividend Increase: 6% increase to $7.08 per share annually .
      4. Financial Outlook: Reaffirmed other aspects of its financial outlook for 2024 .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: N/A (No specific future period guidance in 'Q# ####' or 'FY ####' format)
    • Guidance:
      1. Value and Affordability: Focus on improving value execution .
      2. Store Margins: Expected to be down slightly from 2023 levels .
      3. Consumer Behavior: Addressing pressures on low-income households .
      4. Promotional Activity: Increased promotional activity expected .
      5. Growth Strategy: Focus on menu innovation, digital engagement, and marketing .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Operating Margin: Mid- to high 40s range .
      2. Labor Inflation: High single-digit inflation expected .
      3. Food and Paper Inflation: Low single-digit levels anticipated .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Comparable Sales Growth: Expected to moderate to 3% to 4% .
      2. Net Restaurant Expansion: Contributing nearly 2% to sales growth .
      3. Operating Margin: Mid- to high 40% range .
      4. Interest Expense: Increase between 9% and 11% .
      5. Effective Tax Rate: Between 20% and 22% .
      6. Capital Expenditures: Between $2.5 billion and $2.7 billion .
      7. Free Cash Flow Conversion: 90% range .
      8. G&A as a Percentage of Sales: About 2.2% .
      9. Unit Growth: About 4% driven by more than 1,600 net additions .