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$MCD commented that the $AMZN-$WFM deal announcement demonstrates the disruptive and fast-paced nature of the business world. $MCD continues to challenge itself and is committed to remain competitive on value. $MCD believes deliveries are a good example of how the industry is responding to rapidly-changing consumer expectations.
$MCD reported a 41% decrease in 4Q17 earnings. Net income was $698.7MM or $0.87 per share compared to $1.19Bil or $1.44 per share in 4Q16. The 4Q17 results include approx. $700MM or $0.84 per share of net tax cost as a result of the Tax Act. Excluding this, net income was $1.4Bil or $1.71 per share. Revenues fell 11% to $5.3Bil from last year.
The beverage company $KO, which is planning to launch three ready-to-drink McCafe Frappes with $MCD next year, reported its third quarter 2017 profit of $1.44Bil, up 38% from a year ago. As Soda tax is becoming the hot topic around the country, $KO’s newest diet Coke Zero Sugar helped the sparkling soft drinks unit case volume to remain flat in 3Q17.
$MCD expects to see gains on asset sales in 2018 as it continues to refranchise in some of its conventional license markets, the US and some of the International Lead markets. Following this, the trend is likely to go down a little bit as the number of refranchising transactions will decline.
$MCD is optimistic on coffee as it is a $30Bil business in the US and it is growing mid-to-high-single digits as a category. This is a high margin category and the company is underpenetrated here. $MCD saw good growth in its McCafé business in 3Q17, and looking out over the next few years, expects to use McCafé as a platform for additional growth.
With the sale of its China and Hong Kong markets in 3Q17, $MCD completed its goal to refranchise 4,000 company-owned restaurants. $MCD received cash proceeds of about $1.6Bil from the China-Hong Kong transaction. $MCD expects the refranchising deals done over the last year to have a negative impact on EPS of a few cents per qtr. until 3Q18.
For 3Q17, $MCD’s positive comp sales along with the combined impact of its major refranchising transactions drove an increase in franchise margins of $219MM and a decline in company-operated margins of $148MM. On a percentage basis, consolidated company-operated margins increased 70 BP to 19.1% for the quarter.
In 3Q17, $MCD’s global comparable sales increased 6%, reflecting positive guest counts in all segments. Systemwide sales grew 7% in constant currencies. In the US, comparable sales grew 4.1% and for the International Lead segment, comp sales grew 5.7%. High Growth comp sales rose 6.2% while in the Foundational markets, comp sales rose 10.2%.
Fast food giant $MCD reported a 48% increase in 3Q17 net earnings. Net income was $1.8Bil or $2.32 per share compared to $1.2Bil or $1.50 per share in 3Q16. Diluted EPS growth during 3Q17 was 55%. Total revenues decreased 10% to $5.75Bil compared to last year.
$MCD's BoD approved its 41st consecutive annual dividend increase, lifting the quarterly dividend 7% from $0.94 to $1.01 per share of common stock. The dividend is payable on Dec. 15, 2017 to shareholders of record on Dec. 1, 2017. This brings the 4Q17 dividend payout to about $800MM.
$MCD said it plans to expand its McCafé coffee drinks to the beverage aisle in 2018 with three new ready-to-drink McCafé Frappes, Caramel, Mocha and Vanilla, in partnership with $KO. The new drinks, to be produced, distributed and marketed by the Coca-Cola system, will be available in re-sealable PET bottles at retailers nationwide.
$MCD relaunched its McCafé experience, introducing new café-quality espresso beverages and expanded retail offerings. In early 2018, McCafé will also expand its retail presence by partnering with The Coca-Cola Company to introduce a line of ready-to-drink McCafé Frappé beverages in three flavors, Caramel, Vanilla, and Mocha.
Under $MCD’s Vision 2022 strategy, the opening pace of new restaurants in mainland China is expected to ramp up from about 250 per year in 2017 to 500 per year in 2022. It plans to increase the restaurant portfolio mix in tier 3-4 cities to about 45% of all $MCD restaurants in China and grow Experience of the Future restaurants to over 90%.
$MCD announced a series of development initiatives for mainland China termed Vision 2022. The Vision 2022 strategy aims to drive double-digit sales growth in each of the next five years by increasing the number of restaurants from 2,500 to 4,500, including delivery hub coverage of over 75% of restaurants, by the end of 2022.
$MCD has partnered with CITIC Limited, CITIC Capital Partners, and $CG to operate its businesses in mainland China and Hong Kong. The deal was completed on July 31, 2017, creating the largest McDonald's franchisee outside the US. The sale to the China franchisee includes about 2,500 restaurants in Mainland China and about 240 in Hong Kong.
$MCD has expanded McDelivery with UberEATS to 13 countries, including 3,500 restaurants in the US in the past three months. McDelivery is now available across the globe from over 7,800 restaurants in 47 countries and six continents. $MCD has annual systemwide delivery sales of nearly $1Bil across various markets in Asia and the Middle East.