McDonald's (MCD) fans are still coming to Big Macs, but not as much as Wall Street thought.
When the company announced its fourth quarter results on February 5, the global same-store sales growth rate was 3.4%, lower than the expected 4.79% increase. The company's U.S. sales growth rate was 4.3%, lower than the 4.45% increase expected by Wall Street.
This is in contrast to the third quarter, when overall same-store sales rose 8.8%, beating analyst expectations at the time.
Fourth-quarter adjusted earnings per share rose 18% to $2.95, beating expectations of $2.82, and total sales rose 8% to $6.41 billion.
For fiscal year 2023, McDonald's reported total revenue of $25.49 billion, an increase of 10% from $23.18 billion in 2022.
CEO Chris Kempczinski acknowledged the current consumer environment in his earnings call, saying, “We remain confident in the resilience of our business amid the macro challenges that will continue into 2024.'' ” he said.
He also mentioned McDonald's growth plan, “Arch Acceleration,” which he said has “achieved more than 30% growth.” [of same store sales] This is the first growth since 2019. ”
In the U.S., sales growth in the fourth quarter was driven by marketing campaigns such as the return of McNugget Buddies and Happy Meal Squashmallows, as well as larger check sizes and higher menu prices. For the full year, U.S. sales increased 8.7%.
In the overseas markets in which the company operates, same-store sales rose 4.4% in the fourth quarter, lower than the 12.6% growth posted by McDonald's a year earlier.
In international licensing markets such as Latin America and Asia, same-store sales rose just 0.7% compared to 16.5% in the fourth quarter of 2022. McDonald's said the division's sales were affected by the Middle East wars.
In early January, Kempczinski wrote in a LinkedIn post that “several markets in the Middle East and some markets outside the region are suffering from the war and resulting misinformation that is impacting brands such as McDonald's. , are experiencing a significant impact on their business.”
McDonald's loyalty program was the key to its performance. In the fourth quarter, loyalty members generated $6 billion in sales across 50 markets, totaling more than $20 billion in fiscal 2023 and a 45% increase from 2022.
Before the earnings release, Wall Street appeared to be bullish on the stock.
in 2023 amid concerns such as softening consumer sentiment, rising food inflation such as beef (which may not improve soon given the low supply of cattle), and the potential impact of weight loss drugs. Fast food stocks have taken a hit, but McDonald's appears to have found a solution. Please move forward.
“It's hard to imagine McDonald's not winning in any consumption environment,” Wedbush analyst Nick Setian said in a note to clients, citing menu pricing and innovation, and the effectiveness of its loyalty program. As a result, we expect same-store sales to continue to grow in the short term. Marketing, business execution and efficiency.
Jefferies' Andy Barish named the stock a top pick for 2024, calling it “the best defensive and offensive play in a restaurant with resilience in an uncertain or weak macro environment.” [environment]Barish expects the chain to invest more in digital, delivery, drive-thru and poultry products.
McDonald's has aggressive growth plans. At its Investor Day last December, the company announced that it would expand its footprint to a record 50,000 locations by 2027 and increase the number of loyalty program members from 150 million to 250 million. did.
The chain currently operates more than 40,000 stores, of which more than 39,000 are owned by franchisees.
Revenue breakdown
Here's what McDonald's reported in the fourth quarter compared to Wall Street expectations, according to Bloomberg consensus data:
Revenue: $6.41 billion vs. Expected to be $6.45 billion
Adjusted EPS: $2.95 vs. expected $2.82.
Global same-store sales growth: 3.4% vs. expected 4.79%
US same-store sales growth: 4.3% vs. expected 4.45%
IGrowth in same-store sales in overseas operating markets: 4.4% vs. 5.03% expected
Same-store sales growth in internationally developed licensing markets: 0.7% vs. 5.06% expected
Here's how McDonald's will report for fiscal 2023 compared to Wall Street expectations, according to Bloomberg consensus data:
Revenue: $25.49 billion vs. expected $25.53 billion
Adjusted EPS: $11.94 per share and expected $11.78 per share
Global same-store sales growth: 9.0% vs. expected 9.41%
US same-store sales growth: 8.7% vs. expected 8.81%
IGrowth in same-store sales in overseas operating markets: 9.2% vs. 9.53% expected
Same-store sales growth in internationally developed licensing markets: 9.4% vs. expected 10.51%
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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