MCDONALDS CORP (MCD)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 was soft: global comparable sales fell 1.0% (U.S. -3.6%; IOM -1.0%; IDL +3.5%), consolidated revenue declined 3% to $5.96B, and GAAP diluted EPS dropped 2% to $2.60; adjusted EPS was $2.67 on $66M restructuring charges .
• Against Wall Street consensus, revenue missed ($6.13B est vs $5.96B actual*) while adjusted EPS was essentially in line ($2.67 est vs $2.67 actual*); EBITDA modestly missed ($3.28B est vs $3.18B actual*)*.
• Management reaffirmed full-year 2025 targets (operating margin mid-to-high 40%, SG&A ≈2.2% of systemwide sales, capex $3.0–$3.2B, tax 20–22%) and flipped FX from an expected EPS headwind in February (−$0.20 to −$0.30) to a +$0.05 tailwind based on current rates .
• The strategic catalyst is value-plus-news: U.S. McValue platform (with $5 meal retained for 2025) delivered a positive guest count gap vs peers; April’s Minecraft campaign sold out collectibles in ~10–14 days; nationwide McCrispy chicken strips launch underway; beverage category test planned in existing U.S. restaurants .

Note: Values with an asterisk (*) are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Value execution drove share resilience: U.S. delivered a positive comp guest count gap vs most near-end competitors; customer satisfaction hit an all-time high in Q1 .
• Strong marketing momentum in April: “Minecraft Movie” promotion sold out U.S. collectibles in 10–14 days, illustrating the power of full-margin promotions paired with value .
• International bright spots: France returned to market share gains with €4 Happy Meal and Big Arch; Canada saw positive comps and guest counts aided by $1 coffee and “Hockey Showdown” campaign .

What Went Wrong

• Top-line softness: Global comps -1.0% and revenue -3% YoY; U.S. comps -3.6% on negative guest counts; company-operated margins fell 15% .
• Macro/consumer pressure broadened: U.S. industry traffic from low-income cohorts down nearly double digits; middle-income traffic declined nearly as much in Q1 .
• UK remained a drag: negative comparable sales and share losses to expected competitors; execution improvements still required .

Financial Results

Segment Comparable Sales (% constant currency)

Systemwide Sales Growth

Revenue by Segment ($USD Millions)

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Consumers today are grappling with uncertainty, but they can always count on McDonald’s for both exciting new menu items and delicious favorites for exceptional value, from a brand they love.” — Chris Kempczinski, CEO .
• “In the U.S., [we] raised our customer satisfaction scores to an all-time high... we delivered a positive comp guest count gap to most near-end competitors supported by the launch of our McValue platform.” — Ian Borden, CFO .
• “We expect foreign currency translation to be a tailwind to 2025 earnings per share of about $0.05 per share.” — Ian Borden, CFO .
• “We’ll be launching a beverage test in the U.S. in some of our existing McDonald’s restaurants that will incorporate new menu items inspired by CosMc.” — Chris Kempczinski .
• “In the U.K., [the market] is not yet gaining share… it’s about our execution and just doing a better job in that market.” — Chris Kempczinski .

Q&A Highlights

• U.S. trajectory: Q1 was designed to embed McValue; momentum building with April marketing and May chicken strips; execution is the near-term key .
• Value design: $5 meal will continue through 2025; “buy 1, add 1 for $1” has high take-rate but lower incrementality vs $5 meal; franchisee discussions ongoing .
• Pricing/mix: Menu pricing moderating with inflation; aim to pair value with full-margin marketing/menu innovation to sustain checks and margins .
• Cohort behavior: Low-income U.S. QSR traffic down nearly double digits; middle-income declines broadened; high-income remains solid .
• Beverage strategy: CosMc’s learnings (80% recipe-based orders, food attachment expected) inform in-restaurant beverage test; category profit pool attractive .

Estimates Context

Note: Values marked with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

• Near-term trading setup: Revenue and EBITDA misses vs consensus may cap upside, but the FX tailwind reversal (+$0.05 EPS) and visible pipeline (Minecraft, chicken strips, beverage test) are supportive for sentiment into Q2–Q3 .
• U.S. playbook intact: Value-plus-full-margin promotions is working (positive guest count gap, all-time high CSAT); watch continued $5 meal execution and incremental check from menu news .
• International: France/Germany improving; UK remains a work-in-progress—monitor execution updates and value efficacy in coming quarters .
• Margin framework: Company-operated margins under cost pressure (Europe commodities), but consolidated operating margin guided mid-to-high 40% for FY’25; SG&A discipline (~2.2% of systemwide sales) continues .
• Capital allocation: Dividend maintained ($1.77/quarter) and buybacks continued (1.5M shares, $447M); capex elevated for ~2,200 openings and ~1,800 net adds in 2025 .
• Risk watch: Consumer bifurcation (low/middle-income softness), UK execution, and European input cost inflation are key downside variables; offset by value agility and targeted promotions .
• Thesis: McDonald’s scale, franchised model resilience, and disciplined value/innovation cadence underpin medium-term guest count-led growth and operating margin stability; monitor data points from beverage test and chicken platform expansion for additional mix and margin leverage .