McDonald’s sales improve on stronger international results
McDonald’s Corp. sales rose in the fourth quarter after growth in the chain’s international business made up for a decline in the US.
Global same-stores sales climbed by 0.4%, while analysts polled by Bloomberg were anticipating a decline. That snapped two straight negative quarters for McDonald’s prompted by diners cutting down on restaurant outings and boycotts following the Israel-Hamas war.
US sales were the weak spot, falling 1.4% in the quarter, a steeper decline than analysts were anticipating. Guest counts grew slightly, but the average order size shrank from a year ago, when higher prices helped buoy checks.
In the quarter, McDonald’s contended with an E. coli outbreak in the US that killed one person, sickened more than 100 and spooked customers. McDonald’s pledged $100 million toward efforts to win guests back. At the same time, the chain was promoting a $5 meal deal launched in June to reverse perceptions that its food was too expensive.
US trends hit a bottom in November after the E. coli outbreak and have improved since, Chief Executive Officer Chris Kempczinski said on a call with analysts. The chain expects traffic to recover before order sizes, which should also grow as it launches new products. In January, McDonald’s unveiled a new value platform, and it’s planning to introduce chicken strips.
The US result was offset by the company’s two international divisions, with the business that includes Japan and the Middle East posting a 4.1% increase in same-store sales.
In the Middle East, trends are positive largely because they are being compared to 2023, when sales slumped due to the outbreak of the war, Chief Financial Officer Ian Borden said on a call with analysts. The company warned that the impact on results could continue until the conflict concludes.
McDonald’s other international segment, which includes markets such as France and the UK, was largely flat. Analysts had expected declines across all of McDonald’s divisions.
Shares in the company rose 4% at 9:32 a.m in New York trading on Monday. McDonald’s stock is virtually flat with where it was 12 months ago, while the S&P 500 Index has risen 21%.
McDonald’s posted profit of $2.83 per share in the fourth quarter, excluding some items, a slight decline from the prior year. Consolidated revenue was flat.
Spending Pressure
Last year, the company embarked on a global campaign to lure inflation-weary customers back, including with an offer for coffee starting at C$1 in Canada and a €4 Happy Meal in France. In addition to its value meal in the US, the company sought to whip up excitement with offers such as Halloween buckets and a limited-time dulce de leche frappé.
Pressure on consumer spending persists among low-income consumers and families, Borden told analysts. It’s particularly acute in Europe, he said.
McDonald’s said it expects operating margin in the mid-to-high 40% range. It’s also planning to spend $3 to $3.2 billion, mostly to build new restaurants in the US and some of its international markets.
The chain plans to open 1,800 restaurants net in 2025. It ended 2024 with 43,477 restaurants around the world, a roughly 4% increase from the prior year.